Market slumps on surging crude oil

The market slumped last week as a flare-up in global oil prices and worries about its negative impact on the Indian economy rattled the equity market ahead of the Union Budget on Monday, 28 February 2011. India imports 80% of its crude needs, accounting for 3.5% of global consumption. The sharp rise in oil prices will likely add to economic stress in India at a time when the country is already battling high food inflation.



The BSE Sensex fell 510.61 points or 2.80% to 17,700.91 in the week ended Friday, 25 February 2011. The S&P CNX Nifty fell 155.40 points or 2.84% to 5,303.55. The BSE Mid-Cap index fell 4.63% and the BSE Small-Cap index fell 4.18%. Both these indices underperformed the Sensex.

Disruption in oil supplies as Libya tumbled into chaos sent the price of a barrel of Brent crude to as much as $119, the highest in 30 months, amid crisis in Libya. Production of oil in the world's 12th largest crude oil exporter was crippled as protests against the 41-year rule of Moammar Gadhafi spread across the North African country.

Foreign institutional investors (FIIs) outflow in February 2011 totaled Rs 1806.30 crore (till 23 February 2011). FIIs had sold equities worth Rs 4813.20 crore in January 2011. FII outflow in the calendar year 2011 totaled Rs 6619.40 crore (till 23 February 2011).

Food price index rose 11.49% and the fuel price index climbed 12.14% in the year to 12 February 2011, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 11.05% and 11.92%, respectively. The primary articles price index was up 15.77% in the latest week, compared with an annual rise of 14.59% a week earlier.

High volatility was the order of the day on Monday, 21 February 2011, as the key benchmark indices, which hovered in negative territory for most part of of the trading session, spurted in late trade. The 50-unit S&P CNX Nifty crossed 5,500 mark, with the sentiment boosted by the government's decision to concede opposition parties' demand for setting up a Joint Parliamentary Committee (JPC) to investigate the 2G spectrum scam to end the deadlock in the parliament. The BSE 30-share Sensex rose 226.79 points or 1.25% at 18,438.31. The S&P CNX Nifty rose 59.65 points or 1.09% to 5,518.60.

The key benchmark indices edged lower in choppy trade on Tuesday, 22 February 2011, as macroeconomic worries arising from surging crude oil prices and geopolitical tensions due to crisis in Libya weighed on the sentiment. Global stocks fell as investors were worried about the risk of the unrest in Libya spreading to bigger economies such as Saudi Arabia and China. The Nifty fell below the 5,500 level, having moved above and below that level alternatively in intraday trade. The BSE 30-share Sensex fell 142.15 points or 0.77% to 18,296.16. The S&P CNX Nifty fell 49.40 points or 0.9% to 5,469.20.

The key benchmark indices fell for the second straight day on Wednesday, 23 February 2011, as global stocks fell on continued unrest in Libya. The BSE 30-share Sensex was down 117.83 points or 0.64% to 18,178.33. The S&P CNX Nifty was down 31.85 points or 0.58% to 5,437.35.

Investors dumped stocks on Thursday, 24 February 2011, amid geopolitical tensions arising from crisis in Libya and on macroeconomic worries caused by a rally in crude oil prices, as the key benchmark indices nosedived to their lowest level in two weeks in a broad based sell-off. The BSE 30-share Sensex was down 545.92 points or 3% to 17,632.41, its lowest closing since 10 February 2011. The S&P CNX Nifty was down 174.55 points or 3.21% to 5262.70 its lowest since 10 February 2011.

The key benchmark indices edged higher on Friday, 25 February 2011, amid intense volatility as the government's Economic Survey for 2011-11 tabled in the parliament noted that deepening the reform process would hold the key to sustaining the fiscal consolidation process. The market recovered after hitting 2-week lows as government's forecast of a strong about 9% economic growth for the year ending March 2012 offset a populist rail budget where passenger fares were kept unchanged. Firm global stocks also supported Indian equities. The BSE 30-share Sensex rose 68.50 points or 0.39% to 17,700.91. The S&P CNX Nifty fell 40.85 points or 0.78% to 5,303.55.

Among the 30 Sensex shares, 23 fell and the rest rose.

India's largest tractor maker by sales Mahindra & Mahindra was the biggest Sensex loser last week. The stock fell 8.62% to Rs 595.10.

India's largest real estate company by market capitalisation DLF was the second biggest Sensex loser last week. The stock fell 8.57% to Rs 212.85.

India largest truck maker by sales Tata Motors was the third biggest Sensex loser last week. The stock tumbled 7.72% to Rs 1513.10. The stock fell on fears of increased competition as Chinese truck manufacturers plan to start operations in India, buoyed by rising opportunities in the world's fast growing truck market.

Larsen & Toubro (down 7.72%), Tata Power Company (down 7.02%), Jaiprakash Associates (down 6.39%), State Bank of India (down 6.22%) and Reliance Communications (down 6.01%), were the other major Sensex losers last week.

Anil Ambani controlled Reliance Infrastructure was the major Sensex gainer last week. The stock rose 5.35% to Rs 638. The stock jumped as the company's New Delhi airport rail-link began operations from 23 February 2011.

Index heavyweight Reliance Industries (RIL) was the second major Sensex gainer last week. The stock rose 3.05% to Rs 965.95. RIL announced a major deal with BP whereby BP will take 30% stake in 23 oil and gas blocks of RIL. RIL would also be entitled to future performance payments of up to $1.8 billion based on exploration success that results in development of commercial discoveries. These payments and combined investment could amount to $20 billion.

India's largest motorcycle maker by sales Hero Honda Motors was the third major Sensex gainer last week. The stock rose 2.51% to Rs 1500.35. The stock rose on reports the company's Indian promoter received an approval from the Foreign Investment Promotion Board to raise Rs 4,500-crore from overseas investors. According to reports, Hero Honda's Indian promoters, the Munjal family, needs around Rs 4,500 crore to buy out the 26% stake of its Japanese partner in Hero Honda Motors, which they have run jointly for 26 years. Since the proposal is for more than 1,200 crore, it needs the approval of the Cabinet Committee on Economic Affairs (CCEA). The proposal has been sent to CCEA.

TCS (up 1.91%), ITC (up 0.39%), Wipro (up 0.14%) and Hindustan Unilever (up 0.09%), were the other Sensex gainers.