Market recovers after initial bloodbath; Sensex sheds 336 points

After an initial jolt, the market staged a solid rebound from lower level today even as it ended in the red. Securities & Exchange Board of India (Sebi) Chairman M Damodaran assured that participatory notes (PNs) are not being banned. The market had earlier recovered after Finance Minister’s comments that there is no proposal to ban participatory notes. Earlier the market regulator Sebi’s proposals to clamp down participatory notes to restrict foreign inflows, announced after trading hours on Tuesday, 16 October 2007, created havoc on the bourses today. Trading was halted just within minutes of opening, as market wide circuit filters were triggered by a steep fall. European markets were in the green.

IT stocks edged higher. Metal, realty, banking stocks declined heavily. Reliance Industries gained ground, with the stock staging a solid rebound from lower level. Reliance Energy recovered from lower level. Most of the Sensex stocks recovered from their lower levels after an initial setback. Asian markets were mixed. Market breadth was weak.

The BSE 30-share Sensex ended down 336.04 points, or 1.76%, to 18,715.87. It opened with a downward gap of 1,013.96 points at 18,037.90. When the trading was halted at 09:57 IST, Sensex was down 1,743.96 points or 9.15% to 17,307.90.

The broader based S&P CNX Nifty ended down 108.75 points, or 1.92%, to 5,559.30. When the trading was halted at 09:57 IST, Nifty was down 524.15 points or 9.25% to 5,143.90.

Nifty October 2007 futures were at 5,552.20, a discount of 7.1 points over the spot price of 5,559.30.

Finance Minister P Chidambaram said on Wednesday, 17 October 2007, the proposals to moderate portfolio investment by foreign investors were part of a series of steps to moderate capital inflows.

Chidambaram told a news conference that foreign investors were still welcome to invest in India through participatory notes but it was important to moderate inflows at present and the decision was good for markets in the long term.

After market hours on Tuesday, 16 October 2007, market regulator Securities & Exchange Board of India (Sebi) proposed a number of restrictions that will effectively spell doom for the thriving participatory note (PN) activity in the stock market. All this was done to slam brakes on the flows of anonymous foreign capital.

PNs are financial instruments used by investors or hedge funds that are not registered with Sebi, to invest in Indian shares. FIIs and their sub-accounts buy Indian securities and then issue PNs to foreign investors with these securities as the underlying.

Once the Sebi proposals are operationalised, only FIIs whose outstanding notes do not exceed 40% of their total asset holding in India will be allowed to issue fresh ones. For instruments already issued by FII sub-accounts, Sebi has given a window of 18 months to wind up existing positions.

Securities & Exchange Board of India (Sebi) Chairman, M Damodaran, clarified to television media that participatory notes (PN) are not being banned and there will be no bar on FII inflows. But it is important to differentiate between PN underlyings, he added. He said that 18 months for unwinding will be enough and during this time, serious investors can register themselves. PNs can be renewed post unwinding the equal amount. Sebi is looking at encouraging more FII registrations and therefore it may look at simpler FII registration norms. He also clarified that Sebi is not proposing a ban on offshore derivatives.

As per reports, the notional value of investments through PN’s route grew almost ten times to Rs 3.53 lakh crore at the end of August 2007 from just Rs 31, 875 crore three years ago

BSE clocked a turnover of Rs 10,159 crore today compared to Tuesday (16 October 2007)'s Rs 9,794.35 crore. NSE futures & options (F&O) segment clocked a turnover of Rs 98,395.58 crore today, 16 October 2007 compared to a turnover of Rs 90751.74 crore crore on Tuesday,16 October 2007.

Turnover on BSE was a mere Rs 122.02 crore when trading was halted on the bourses at about 9:57 IST. It was just Rs 48 crore on NSE by that time. NSE's futures & options segment had clocked a turnover of Rs 4347 crore by that time.

Of the 30 shares of the Sensex, 5 had moved up, while the remaining were trading down. The market breadth was weak: 922 scrips advanced, 1,733 declined, while 378 remained unchanged.

BSE Mid Cap index lost 2.34% to 7,600.94 and underperformed Sensex. BSE Small Cap index declined 1.65% to 9,201.58 and outperformed Sensex.

BSE Auto index (down 2.19% to 5,476), BSE Bankex (down 3.67% to 9,60761), BSE Metal index (down 2.7% to 15,719.80) and BSE Realty index (down 3.5% to 9,831.12) underperformed Sensex.

BSE Capital Goods index (down 1.69% to 16,824.54), BSE IT index (up 1.02% to 4,676.49) and BSE FMCG index (down 1.66% to 2,100.38) outperformed Sensex.

India’s largest private company in terms of market capitalization and oil refiner Reliance Industries (RIL) rose 1.59% to Rs 2,690.30. The stock came off session's low of Rs 2,278.60. Volume in the stock was a huge 37.65 lakh shares on BSE.

Reliance Energy (REL) declined 7.46% to Rs 1,762.40 and was the top loser from Sensex pack. It recovered sharply from session's low of Rs 1,532 in afternoon trade. Reliance Energy’s net profit jumped 34.17% to Rs 250.08 crore on 13.65% rise in total Income to Rs 1799.92 crore in Q2 September 2007 over Q2 September 2006. REL announced the results today during the market hours today.

ACC (down 5.05% to Rs 1,202.65) , Bharat Heavy Electricals (down 4.69% to Rs 2,283.50) and NTPC (down 4.52% to Rs 220.80) were the major losers from Sensex pack.

Larsen & Toubro was down 1.58% to Rs 3,293.50. It recovered sharply from session's low of Rs 3,000.

Metal shares lost ground. Tata Steel (down 4.19% to Rs 869.10), Steel Authority of India (down 1.9% to Rs 247.25) edged lower. Hindalco Industries rose 0.25% to Rs 197.95.

Realty shares dropped. DLF (down 2.45% to Rs 896), Indiabulls Real Estate (down 4.06% to Rs 577.60) and Unitech (down 3.51% to Rs 341.30) edged lower.

Banking stocks declined but recovered from lower levels. ICICI Bank down 3.45% to Rs 1,116.85. It recovered from session's low of Rs 1,012.15. HDFC Bank (down 2.99% to Rs 1,459.60) and State Bank of India (down 4.98% to Rs 1,828.50) edged lower.

Buying was witnessed in IT stocks at lower level. BSE IT index was the lone gainer from sectoral indices on BSE. TCS (up 2.53% to Rs 1,095.10), Infosys (up 1.16% to Rs 1,889.90), Satyam Computer Services (up 1.63% to Rs 457.25) edged higher. Wipro was down 0.07% to Rs 485.90.

The Indian rupee was trading at 39.52 against the dollar, weaker than yesterday’s closing of 39.35/39.36. A firm rupee impacts margins of IT firms, as they earn a lion’s share of revenue from export to US markets.

Bhati Airtel declined 0.52% to Rs 1,104.05. It recovered from its intraday low of Rs 985.

Deccan Chronicle Holdings surged 3.49% to Rs 176.25 after it scheduled a meeting of the board of directors on 26 October 2007 to consider a proposal for buy-back of equity shares.

Temptation Foods jumped 4.37% to Rs 257 after the company said it would acquire the food-processing unit of Chambal Fertilisers and Chemicals.

Jubilant Organosys jumped 6.14% to Rs 310.95 after it posted 106.09% spurt in net profit in Q2 September 2007 over Q2 September 2006.

Alembic soared 1.69% to Rs 87.20 after the company said it has entered into a deal with Inorbit Malls for sale of land in Vadodara, Gujarat.

State Trading Corporation of India was locked at upper limit of 5% of to Rs 565.55 on BSE after the company said its board would meet on 31 October 2007 to consider a bonus issue of shares.

Dhanus Technologies ended at Rs 311.15, a premium of 5.47% over the IPO price of Rs 295 on its debut today.

Side counters SKP securities (up 19.92% to Rs 58.70), S E Investments (up 19.91% to Rs 529), GSB Finance (up 19.97% to Rs 15.26) and Gajra Bevel (up 20% to Rs 13.86) edged higher.

Era E-Zone India (down 12.41% to Rs 54) and Tata Power Company (down 14.22% to Rs 1,175.95) edged lower.

Power Grid Corporation of India was the volume topper on BSE, notching total volume of 4.76 crore shares. The stock surged 6.62% to Rs 135.20. Reliance Natural Resources clocked the second highest volume of 3.68 crore. The scrip rose 1.2% to Rs 96.90.

Reliance Petroleum declined 1.41% to Rs 181.15 and clocked third highest volume of 2.26 crore. Tata Teleservices Maharashtra declined 7% to Rs 41.20. It clocked 2.21 crore shares on BSE. IFCI declined 5.45% to Rs 81.60 and clocked fifth highest volume of 1.22 crore shares on BSE.

European markets opened on a positive note. France’s CAC 40 (up 0.78% to 5,819.57) and UK’s FTSE 100 (up 0.94% to 6,676.80) and Germany’s DAX (up 0.04% to 7,965.61) edged higher.

Asian markets were trading lower today, 17 October 2007. Japan's Nikkei (down 1.07% at 16,955.31), South Korea's Seoul Composite (down 1.09% at 1,983.94), and Taiwan's Taiwan Weighted (down 0.32% at 9,52.14) edged lower. Hong Kong's Hang Seng (up 1.19% at 29,298.71) and Singapore's Straits Times (up 0.76% at 3,839.73)edged higher.

Crude oil slipped slightly on Wednesday, 17 October 2007, staying within sight of its record high amid renewed investor appetite built on fears of rapidly tightening supplies this winter and a revived Middle East risk premium. US crude slipped 13 cents to $87.48 a barrel. It hit record high of $88.20 on Tuesday, 16 October 2007.

The Sensex rose 3,382.74 points or 21.58 % to 19,051.86 on 16 October 2007 since the US Federal Reserve cut interest rates on 18 September 2007, driven by large foreign fund flows. Sensex was at 15,669.12 on 18 September 2007.

The S&P CNX Nifty rose 1,121.85 points or 24.67% to 5,668.05 on 16 October 2007 since the U.S. Federal Reserve cut interest rates on 18 September 2007, driven by large foreign fund flows. Nifty was at 4,546.20 on 18 September 2007.

FIIs were net buyers of shares worth Rs 22,175.20 crore in this month, till 15 October 2007. FII inflow in calendar year 2007 totaled Rs 73,341.30 crore (till 15 October 2007).

There are a total of 1,113 FIIs registered with the Securities & Exchange Board of India (Sebi) as on 15 October 2007.