Sensex tumbles to 2-week low as oil surges on unrest in Libya

Investors dumped stocks 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. All the sectoral indices on BSE were in the red and the market breadth was quite weak. The BSE 30-share Sensex was down 545.92 points or 3%, up close to 75 points from the day's low and off close to 500 points from the day's high. The market fell for the third straight day today as the near-month February 2011 derivatives contracts expired. The BSE Sensex has lost 2,876.68 points or 14.02% in calendar 2011 so far.



Indian stocks underperformed mostly lower global stocks. Crude oil hit 2-year high on concerns about oil supply amid ongoing unrest in OPEC-member Libya. India imports majority of its crude oil requirements. US crude oil futures for April 2011 were at $101.03 a barrel, up $2.93, or 2.99%. The situation in Libya, the North African country, remains tense because of clashes between supporters and opponents of the county's ruler Muammar Gaddafi. Libya is one of several countries in North Africa and the Middle East to witness a popular uprising in recent weeks.

Surging global oil prices kept the spotlight on inflation pressures and the possibility of more monetary tightening from the Reserve Bank of India. The surge in global oil prices may force the Indian government to raise diesel prices. This could add to inflationary pressures as diesel is a key transportation fuel.

Index heavyweight Reliance Industries (RIL) fell more than 3%. Metal stocks fell as metal prices declined on London Metal Exchange on Wednesday, 23 February 2011. Banking stocks declined on worries rising interest rates could slow credit offtake. Sugar, realty, consumer durables and capital goods stocks tumbled.

The market edged lower in early trade as political unrest in Libya continued. The market extended initial losses in morning trade. The market further extended initial losses to hit fresh intraday lows in mid-morning trade. The market trimmed losses in early afternoon trade. The market slumped in choppy trade later. The market trimmed losses after hitting a fresh intraday low in late trade.

The BSE 30-share Sensex was down 545.92 points or 3% to 17,632.41, its lowest closing since 10 February 2011. The Sensex tumbled 618.63 points at the day's low of 17,559.70 in late trade,. The Sensex fell 43.21 points at the day's high of 18,135.12 in early trade.

The S&P CNX Nifty was down 174.55 points or 3.21% to 5262.70 its lowest since 10 February 2011. The Nifty hit low of 5242.50.

The BSE Mid-Cap index was down 2.91% and the BSE Small-Cap index was down 2.77%. Both of these indices outperformed the Sensex.

The market breadth, indicating the health of the market, was quite weak. On BSE, 2287 shares declined while 604 shares advanced. A total of 76 shares remained unchanged.

From the 30 share Sensex pack, 28 fell and two rose.

BSE clocked turnover of Rs 3632 crore higher than Rs 3157.42 crore on Wednesday, 23 February 2011.

Index heavyweight Reliance Industries (RIL) fell 3.06% on profit taking after a two-day rally triggered after a deal with BP announced after market hours on Monday, 21 February 2011. British Petroleum (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.

PSU OMCs extended recent losses on firm crude oil prices. Higher crude oil prices will increase under-recoveries of state-run oil firms on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol. BPCL, Indian Oil Corporation and HPCL fell by between 3.04% to 4.26%.

Software stocks extended recent losses on worries tax benefits under the Software Technology Parks of India (STPI) and export-oriented unit schemes may not be extended beyond March 2011. India's second largest software firm by sales Infosys Technologies lost 1.84%. India's largest software firm by sales TCS declined 1.1% and India's third largest software firm by sales Wipro fell 2.43%.

Most auto stocks fell on fuel price hike worries and on concerns the government may rollback fiscal stimulus by hiking excise duty in the Budget. Ashok Leyland, Bajaj Auto, Maruti Suzuki India, M&M declined by between 1.71% to 3.73%.

Tata Motors tumbled 7.54% 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..

Hero Honda Motors fell 0.06%, reversing initial gains. The stock jumped 5.45% on Wednesday. As per reports, the Foreign Investment Promotion Board (FIPB) has cleared the proposal of the Indian promoter -- the Munjal family to raise Rs 4,500-crore from overseas investors. The Munjal family needs funds to buy out the 26% stake of its Japanese partner in the country's largest two-wheeler company, Hero Honda Motors, which they have run jointly for 26 years. Since the proposal is for more than Rs 1200 crore, it needs the approval of the Cabinet Committee on Economic Affairs (CCEA). The proposal has been sent to CCEA report said.

The Munjals are raising the money in Hero Investment (HIPL), a non-banking financial company that owns 17.33% in the joint venture. HIPL will buy the Japanese stake in one or more tranches, taking its holding to 43.33%. In addition, Munjal family owns 8.67% stake in Hero Honda through Bahadur Chand Investments (BCIPL).

India's biggest engineering & construction firm by sales Larsen & Toubro fell 4.94% on concerns unrest in West Asia and North Africa could impact operations in the region. L&T has orders from the Middle East.

Among other capital goods stocks, Praj Industries, ABB, Punj Lloyd, Gammon India and Siemens shed by between 0.14% to 7.87%.

Marketmen expect the government to continue thrust on development spending in the Union Budget 2011-12 to be unveiled on 28 February 2011. The capital goods sector expects the government to selectively raise import barriers for capital equipment, especially power equipment to facilitate domestic players.

Interest rate sensitive realty stocks declined on worries higher in interest rates could impact property demand. Property sales are mostly driven by borrowed funds. Godrej Properties, DLF, Indiabulls Real Estate, DB Realty, HDIL, Unitech and Ackruti City shed by between 0.96% to 9.99%.

Metal stocks fell across the board as LMEX, a gauge of six metals traded on the London Metal Exchange declined 0.89% on Thursday, 24 February 2011. Bhusha Steel, Steel Authority of India, Hindalco Industries, Sterlite Industries, Jindal Steel & Power and Hindustan Zinc shed by between 0.77% to 5.37%.

India's largest steel maker by sales Tata Steel fell 2.85%, reversing initial gains after company said on Wednesday it has not yet made a decision regarding its stake in Africa-focused coal miner Riversdale. Tata Steel holds a 24% stake in Riversdale, which has received a $3.9 billion bid from Rio Tinto.

Marketmen expect hike in import duty on HR coil from 5% to 10% in the Budget to encourage the growth of domestic steel industry. The metal industry also expects a continued thrust on infrastructure spending in the Budget.

Banking stocks declined across the board on worries rising interest rates could slow credit offtake. India's second largest bank by net profit HDFC Bank declined 2.16%, after the private sector bank increased the base rate by 45 basis points from 7.75% to 8.20% with effect from Thursday. With effect from 1 July 2010, interest rates on new loans and advances, including consumer loans, are determined with reference to base rate.

India's largest private sector bank by net profit ICICI Bank fell 5.43% after the bank said it will raise its base rate by 50 basis points to 8.75% per annum with effect from Thursday, 24 February 2011. ICICI Bank will also raise its benchmark prime lending rate and floating reference rate for consumer loans, including home loans, by 50 basis points. ICICI Bank will also raise interest rate on term deposits by up to 50 basis points for various tenors with effect from Thursday.

India's largest bank by net profit and branch network State Bank of India fell 3.48%. Canara Bank, Bank of Baroda, Bank of India, Punjab National Bank and Yes Bank shed by between 2.02% to 6.32%.

Banking and financial sector anticipates that the government might reduce the tenure limit for tax exempt deposits from five years to three years in the Budget. Market men also expect government subsidy/concessions on interest rates to be provided on lending to State Electricity Boards (SEBs) given their weak financial health. Another expectation is that of a hike in limit of refinancing from India Infrastructure Finance Company (IIFCL) to commercial bank loans for public-private partnership (PPP) projects in critical sectors from the current Rs 6000 crore.

Consumer durables stocks also edged lower. Blue Star, Gitanjali Gems, Rajesh Exports, Titan Industries and Videocon Industries fell by between 1.14% to 6.24%.

Sugar shares tumbled. Shree Renuka Sugars, Balrampur Chini and Bajaj Hindusthan slumped by between 7.16% to 8.39%.

Stocks of firms whose fortunes are linked to orders from Indian Railway, tumbled ahead of rail budget tomorrow, 25 February 2011. Simplex Casting, BEML, Titagarh Wagons, Stone India, Kernex Micosystems, Kalindee Rail Nirman and Texmaco skidded by between 2.41% to 9.12%.

Shipping stocks fell after the Baltic Dry Index, which tracks rates to ship dry commodities, dropped 2.03% in London on Wednesday, 23 February 2011. GE Shipping Company, Mercator Lines and Shipping Corporation of India fell by between 2.84% to 5.71%.

Airline stocks also extended recent losses on higher crude oil prices. Kingfisher Airlines, SpiceJet and Jet Airways fell by between 4.99% to 10.59%. Jet fuel prices are linked to the crude oil prices. Jet fuel forms 40% of operation cost of airliners.

Sigrun Holdings clocked highest volume of 4.65 crore shares on BSE. Cals Refineries (1.84 crore shares), SpiceJet (1.26 crore shares), Birla Power Solutions (86.69 lakh shares) and Comfort Intech (70.80 lakh shares) were the other volume toppers in that order.

State Bank of India clocked highest turnover of Rs 223.24 crore on BSE. Reliance Infrastructure (Rs 134.27 crore), Tata Steel (Rs 107.23 crore), Reliance Industries (Rs 101.48 crore) and Aurobindo Pharma (Rs 70.80 crore) were the other turnover toppers in that order.

Foreign institutional investors (FIIs) sold shares worth a net Rs 13.10 crore on Wednesday, 23 February 2011, as against an inflow of Rs 92.40 crore on Tuesday, 22 February 2011. FII 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).

Prime Minister Manmohan Singh said on Thursday he was committed to bringing a food security bill to parliament soon and controlling inflation while protecting economic growth. Singh repeated that he expected inflation for March to ease to 7%. He added that the government is committed to achieving 9% to 10% GDP growth.

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.

The government raised serious concern on Wednesday about a trade deficit that could more than double to $278.5 billion in three years and may cause an unsustainable current account deficit. The trade deficit could widen to 12.8% of gross domestic product (GDP) by 2014 from 7.2% in this fiscal year on current trends, leading to a higher reliance on foreign capital inflows to plug the current account gap, a trade ministry document showed. Trade officials floated a series of possible measures in a strategy paper to bolster exports and slash import growth in key sectors such farm products and coal, which they said would keep the trade deficit at a manageable level.

The next major trigger for the stock market is Union Budget 2011-2012 to be unveiled by finance minister Pranab Mukherjee on 28 February 2011. Investors will watch if the Finance Minister announces measures to rein in inflation and inflationary expectations.

Pawan Kumar Bansal, the minister of parliamentary affairs, last week, said the government will introduce a legislation on goods and service tax (GST) in the Budget session of parliament. The original deadline of 1 April 2010 for roll-out of GST has already been missed due to the lack of consensus between the Centre and states on the issue. GST is India's most ambitious indirect tax reform plan, which aims to stitch together a common market by dismantling fiscal barriers between states.

The Railway Budget will be tabled in parliament on Friday, 25 February 2011. The Economic Survey will be tabled in the parliament on the same day after the Railway Budget

The Joint Parliamentary Committee (JPC) to be set up to investigate alleged irregularities in 2G spectrum allocation is likely to have 30 members, with senior Congress leader P C Chacko as its head, media reports said. The committee will have 20 members from the Lok Sabha and 10 from the Rajya Sabha and representation of each party would be decided on the basis of its strength in the two houses.

European shares fell on Thursday, extending losses for the fourth consecutive session and hitting a three-week low, as turmoil in Libya drove oil prices higher and fueled investor concern about the impact on global growth. The key benchmark indices in France, Germany and UK shed by between 0.13% to 1.12%.

Most Asian markets were in the red amid fears political turmoil in Libya could spread to other oil exporters in the region. The key benchmark indices in Singapore, Hong Kong, South Korea, Japan and Indonesia fell by between 0.60% to 1.34%. The key benchmark indices in China and Taiwan rose by between 0.15% to 0.58%.

US index futures reversed initial gains. Trading in US index futures indicated that the Dow could fall 47 points at the opening bell on Thursday, 24 February 2011.

US stocks dropped for the second straight session on Wednesday as Libya's violence sent oil prices up briefly to $100 a barrel and as tech shares sank.

US exports to India, Brazil and other fast-growing emerging markets could remain relatively flat in the absence of a new world trade deal, the White House said on Wednesday in its annual economic report.