Market mauled in global rout in equities, disappointment from RBI

In a carnage in late trade the domestic bourses fell to their lowest level in nearly three years, joining a global equities rout on worries about a sharp global economic slowdown. Sensex provisionally lost 1131.82 points or 11.58%. The sell-off on the domestic bourses began in mid-morning trade as the second quarter monetary policy review by the central bank disappointed the market. Uncertainty on the final order with regard to short sales, also weighed on the bourses. Twenty stocks from the 30-share Sensex pack fell more than 10% each with DLF, Ranbaxy Laboratories and Hindalco Industries leading the fall. Reliance Industries (RIL) tumbled as net profit in Q2 September 2008 rose at the slowest pace in the past 10 quarters. Banking stocks slumped as the central bank did not announce any measures to boost liquidity at the policy review announced at about 11:15 IST. Other rate sensitive stocks also fell on disappointment from the policy review. The Reseve Bank of India (RBI) kept all the key rates unchanged even as it lowered its 2008/09 growth forecast to 7.5% to 8% from a previous forecast of around 8%. The RBI also left the cash reserve ratio, the amount of funds that banks have to keep on deposit with it, unchanged at 6.5%. European shares tumbled on data suggesting Britain would enter a prolonged recession and on dismal corporate results. Key benchmark indices in France, Germany and UK were down by between 8.1% to 9.79%. Trading in US index futures suggested the Dow would fall 550 points at the opening bell. In Asia, Japanese and South Korean stocks, which were down by 7.37% and 9.94% respectively, led fall, as the global economic slowdown slashed earnings prospects for an array of companies, forcing investors to look to safer government bonds. Key benchmark indices in Hong Kong, China, Singapore and Taiwan were down by 1.27% to 4.84%. Back home, there is uncertainty as to what steps the market regulator will take regarding short sales. Despite announcing its displeasure on overseas lending by foreign funds early this, the Securities & Exchange Board has not yet taken any concrete decision in this regard. As per the provisional figures, the BSE 30-share Sensex was down 1131.82 points or 11.58% to 8,639.88. The Sensex fell 1204.88 points at day’s low of 8,566.82 in late trade, its lowest level since 23 November 2005. The index declined 200.99 points at the day's high of 9.570.71 in early trade. The S&P CNX Nifty was down 385.90 points or 13.11% to 2,557.25 as per the provisional figures. Nifty hit a low of 2,525.05 in late trade its lowest level since 11 November 2005. The BSE Mid-Cap index was down 8.64% at 3,086.96 and The BSE Small-Cap index was down 7.88% at 3,653.36. Both the indices outperformed the Sensex. The market breadth was weak. On BSE, 267 shares advanced as compared to 2312 that declined. 48 shares remained unchanged. India’s largest private sector company by market capitalization and oil refiner Reliance Industries plunged 16.89% to Rs 1,010 as net profit in Q2 September 2008 rose at the slowest pace in the past 10 quarters, largely due to fall in refining margins. The net profit rose 7.4% to Rs 4122 crore on 39.8% growth in sales to Rs 44787 crore in Q2 September 2008 over Q2 September 2007. The company announced the result after market hours on 23 October 2008. Ranbaxy Laboratories (down 17.48% to Rs 189.75), Mahindra & Mahindra (down 19.37% to Rs 276), Reliance Infrastructure (down 16.99% to Rs 372), were the other major losers from the Sensex pack. India’s largest power producer by sales NTPC fell 9.73% despite 9.6% rise in net profit to Rs 2110.51 crore on 18.9% rise in total income to Rs 10406.21 crore in Q2 September 2008 over Q2 September 2007. India’s largest electric equipment maker by sales Bharat Heavy Electricals fell 7.31% as net profit declined 10.4% to Rs 615.77 crore on 34.7% rise in net sales to Rs 5342.63 crore in Q2 September 2008 over Q2 September 2007. Banking stocks tanked as the central bank did not announce any measures to boost liquidity at the policy review announced at about 11:15 IST. BSE Bankex fell 12.68%. State Bank of India and HDFC Bank fell between 8.68% to 15.28%. India’s largest private sector bank by net profit ICICI Bank fell 14.38%, even as its American depository receipt (ADR) rose 2% overnight. The bank has reportedly raised its home loan rates by 100 basis points for new borrowers. The bank raised it floating rates from 12% to 13%, with the fixed rate being raised to 16.5% from 10 October 2008. ICICI Bank, State Bank of India and HDFC Bank have a weightage of 24.21%, 22.44% and 20.55%, respectively, in the Bankex. The RBI had cut repo rate by steep 100 basis points early this week. The repo rate is the rate at which the RBI provides funds to banks against the collateral of government bonds for a day to three days. Most realty stocks declined despite hopes cut in lending rates will spur demand for residential properties. The BSE Realty index battered 24.96% and was the major loser from the sectoral indices on BSE.. Realty majors, DLF, Indiabulls Real Estate and Unitech fell by between 13.1% to 56.63%. Metal stocks extended recent losses on slump in metal prices on the London Metal Exchange. The BSE Metal index was down 12.37% Hindustan Zinc, National Aluminum Company, Sterlite Industries Steel Authority of India fell by between 10.59% to 22.59%. Concerns that the global economy will slide into recession rattled commodities markets on Thursday, 23 October 2008. India’s largest steel maker by sales Tata Steel slumped 14.46%, extending losses for the third day in a row, despite a 50.13% rise in net profit to Rs 1787.81 crore on 40.9% rise in net sales to Rs 6744.16 crore in Q2 September 2008 over Q2 September 2007. The company announced the results during trading hours today. The stock had tumbled in the last two days after Moody's Investors Service on 22 October 2008 lowered outlook on corporate family rating to negative from stable due to weak operating enviourment at its UK unit. JSW Steel tumbled 10.28% as net profit slumped 40.57% to Rs 317.45 crore in Q2 September 2008 over Q2 September 2007. India’s largest car maker by sales Maruti Suzuki India slumped 9.87% on 36.5% fall in net profit to Rs 296.1 crore on 5.69% rise in net sales to Rs 4806.3 crore in Q2 September 2008 over Q2 September 2007. FMCG stocks fell after mixed September 2008 quarter results. India’s largest cigarette maker by sales ITC fell 5.66% on a muted 4.13% rise in net profit to Rs 802.72 crore on 14.2% rise in total income to Rs 3973.12 crore in Q2 September 2008 over Q2 September 2007. India’s largest FMCG major by sales Hindustan Unilever fell 7.56% despite a 33.9% rise in net profit to Rs 546.61 crore on 21.08% rise in total income to Rs 4110.91 crore in Q3 September 2008 over Q3 September 2007. Finance minister P Chidambaram on Thursday, 23 October 2008, the Securities & Exchange Board of India (Sebi) has asked foreign institutional investors (FIIs) to reverse short positions on borrowed shares. After trading hours Thursday, 23 October 2008, a finance ministry official clarified that only those transactions of foreign funds in which shares were lent after 20 October 2008 will have to be reversed

Market plunges amid a roller-coaster ride

Weak global stocks pulled the market sharply lower in what was a volatile trading session. Auto and metal stocks led the decline. The BSE 30-share Sensex provisionally lost 374.08 points or 3.68%, below the 10,000 mark. A strong rebound in mid-afternoon trade on Finance minister P Chidambaram’s comments that the Securities & Exchange Board of India (Sebi) has asked foreign institutional investors (FIIs) to reverse short positions on borrowed shares, proved short-lived. Chidambaram told a television channel that the reversal of FIIs' short postions on borrowed shares, is likely to take place over the next few days. Early this week, Sebi had disapproved overseas lending of shares by foreign funds after data showed that FIIs had lent equities worth Rs 348 crore to overseas entities for the purpose of short selling, during 10 October-14 October 2008. The data had later showed that their FIIs had lent equities worth Rs 1000 crore between 10 October-17 October 2008. European markets fell as bearish updates from engineering group ABB and auto group Daimler added to worries about the global economy that sent banks and commodity shares sharply lower. Key benchmark indices in France, UK and Germany fell by between 2% to 3.88%. Asia markets, which had tumbled earlier in the day on fears of a severe global downturn, cut losses on news the Federal Deposit Insurance Corp Chairman Sheila Bair is expected to suggest in a Senate Banking Committee on Thursday that the government give banks incentives to turn troubled loans into more affordable mortgages. Trading in US index futures suggested the Dow would rise 13 points at the opening bell. Easier overseas borrowing norms announced by the Reserve Bank of India (RBI) after trading hours yesterday, 22 October 2008, had failed to stem a steep slide on the domestic bourses at the opening bell caused by setback in Asian stocks. As per the provisional figures on BSE, the BSE 30-share Sensex was down 374.08 points or 3.68% to 9.795.82. The index rose 90.65 points at the day's high of 10,260.55 in mid-afternoon trade soon after the FM's comments on short selling. The Sensex fell 488.62 points at day’s low of 9,681.28 in early trade, its lowest level since 15 June 2006. The S&P CNX Nifty was down 114.15 points or 3.72% to 2,951 as per the provisional figures. Nifty hit a low of 2,918.10 in early trade its lowest level since 24 July 2006. BSE clocked a turnover of Rs 3747 crore today as compared to a turnover of Rs 3,095.17 crore on 22 October 2008. The BSE Mid-Cap index was down 3.16% at 3,380.26 and The BSE Small-Cap index was down 3.33% at 3,974.71. Both the indices outperformed the Sensex. The market breadth was weak. On BSE, 641 shares advanced as compared to 1,885 that declined. 68 shares remained unchanged. India’s largest private sector company by market capitalization and oil refiner Reliance Industries fell 6.88% to Rs 1,225, ahead of Q2 September 2008 results today, 23 October 2008. Ranbaxy Laboratories (down 9.97% to Rs 23.45), HDFC (down 7.88% to Rs 1754.90) and Bharti Airtel (down 6.95% to Rs 621) were the other major losers from the Sensex pack. Grasim Industries (up 4.31% to Rs 1,210.10) Bharat Heavy Electricals (up 2.71% to Rs 1,170), and ONGC (up 2.42% to Rs 779.70) were the gainers from the Sensex pack. Metal stocks extended recent losses on slump in metal prices on the London Metal Exchange. The BSE Metal index was down 10.98% and was the major loser from the sectoral indices on BSE. Hindustan Zinc, National Aluminum Company, Steel Authority of India fell by between 9.99% to 15.3%. Sterlite Industries fell 8.15% desipte 18.51% rise in net profit to Rs 1280 crore on 0.3% rise in net sales to Rs 6590 crore in Q2 September 2008 over Q2 September 2007. Concerns that the global economy will slide into recession rattled commodities markets on Wednesday, 22 October 2008. India’s largest steel maker by sales Tata Steel fell 10.66% tumbling for the second day in a row, after Moody's Investors Service yesterday lowered outlook on corporate family rating to negative from stable due to weak operating enviourment at its UK unit. The stock had plunged 12.04% yesterday, 22 October 2008. Auto stocks tumbled across-the-board on prospects of dismal Q2 September 2008 results from auto majors, as higher interest rates hit demand. Mahindra & Mahindra, Maruti Suzuki India, Tata Motors and Hero Honda Motor fell by between 4.94% to 14.57%. Weak rupee had helped IT stocks recover from initial fall caused by overnight slide in American depository receipts (ADRs) and on lower-than-expected results of Tata Consultancy Services, India's largest IT exporter by sales. TCS led the rebound, gaining 0.2% to Rs 547.45, recovering from the day's low of Rs 497. TCS' net profit fell 2.57% to Rs 1173.04 on a 9.36% rise in sales to Rs 5699.96 in Q2 September 2008 over Q1 June 2008. India's fourth largest IT exporter by sales Wipro fell 2.55% to Rs 272.25. Wipro ADR fell 7.75% overnight after the results. India's third largest IT exporter by sales Satyam Computer Services fell 2.73% to Rs 299.75. Its ADR skidded 4.88% overnight. The company raised its earnings guidance in rupee terms at the time of announcing Q2 September 2008 results on Friday, 17 October 2008. India's second largest IT exporter by sales Infosys down 1.35% to Rs 1,282.75. Infosys ADR lost 4.52% overnight. Infosys, Satyam Computer Services, Tata Consultancy Service and Wipro have a weightage of 55.06%, 16.01%, 10.45% and 7.09%, respectively, in the BSE IT index. The Indian rupee dropped to a record low beyond 49.50 per dollar in opening deals on Thursday as sharp falls in Asian shares heightened fears of more capital outflows from the local stock market. The partially convertible rupee was at 49.68/69 per dollar, 0.80% weaker than Wednesday's close of 49.28/29. A weak rupee results in higher revenues for IT companies as they earn most of their revenues in dollar terms. Key banking pivotals dropped in volatile trade on sharp fall in ICICI Bank ADR overnight. India’s largest commercial bank State Bank of India fell 4.84%. India’s largest private sector by bank by net profit ICICI Bank fell 7.79% to Rs 365.55. Its ADR fell sharply by 15.2% overnight. India’s second largest private sector bank by net profit HDFC Bank rose 2.23%. ICICI Bank, State Bank of India and HDFC Bank have a weightage of 24.21%, 22.44% and 20.55%, respectively, in the Bankex. Inflation based on the wholesale price index (WPI) rose 11.07% in the year through 11 October 2008, much lower than previous week’s 11.44% rise, date released by the government during trading hours, showed. The Reserve Bank of India cut repo rate by 100 basis points to 8% on 20 October 2008. The repo rate is the rate at which the RBI provides funds to banks against the collateral of government bonds for a day to three days. India’s largest cement maker by sales ACC fell 2.02% as net profit remained flat at Rs 283.43 crore on 7.9% rise in total income to Rs 1870.65 crore in Q3 September 2008 over Q3 September 2007. According to the new rules notified by the Reserve Bank of India, external commercial borrowings up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end uses under the automatic route. Indian companies can also pay higher interest rate of up to 500 basis points over the six-month libor on external commercial borrowing. Crude oil for December 2008 delivery rose as much as $1.06, or 1.6%, to $67.81 a barrel on the New York Mercantile Exchange today.

Nifty October 2008 futures below 3000

Nifty October 2008 futures were at 2932.60, at a discount of 10.55 points as compared to spot closing of 2943.15. NSE's futures & options (F&O) segment turnover was Rs 53,624.95 crore, which was higher than Rs 50,046.83 crore on Wednesday, 22 October 2008.

State Bank of India October 2008 futures were at premium at 1330.35 compared to the spot closing of 1326.25.

Reliance Industries October 2008 futures were at premium at 1219.05 compared to the spot closing of 1217.65.

ICICI Bank October 2008 futures were at premium at 366.40 compared to the spot closing of 365.80.

In the cash market, the S&P CNX Nifty lost 122 points or 3.98% at 2943.15.

India's short-term outlook cloudy: PM

The short-term outlook for Indian economy looks “cloudy” in the face of the global financial meltdown and steps are required to prevent the credit crunch from turning into a crisis of confidence, Prime Minister Manmohan Singh said today.“The short-term outlook is cloudy, but I am confident that the Indian economy has the resilience to sustain its growth momentum in the medium term... We have to prevent the liquidity crisis from becoming a crisis of confidence in the international monetary and financial system,” he said. Singh was addressing a gathering of top Indian and Japanese business leaders here on the second day of his three-day official visit to Japan.India has unleashed a host of measures, including a cut in key rates by its central bank, to increase credit flow in and the government has also announced that more steps would be taken to stimulate the economy, which is expected to post near-8-per-cent growth despite the global slowdown. The prime minister said the “great turbulence in the world economy” had “choked credit flows” and predictably spilled over to the stock market — which has been testing over two-year lows. Singh, an eminent economist himself, said that the global nature of the crisis calls for a coordinated global response. “Developing economies like India are affected by the crisis and have to be part of the solution.” “We hope to build on India’s many strengths as an emerging market economy that is now ready for rapid growth. Over the past four years, we have averaged 9 per cent GDP growth per year. “It (economy) will slow down in the current year because of conditions in the global economy. Once normalcy returns, we can regain the 9 per cent trajectory,” Singh said confidently, assuring foreign investors about the stability of India.Even the most pessimistic estimates have placed the growth rate at not less than 7 per cent. Measures taken by the Reserve Bank of India (RBI) and the government this month are aimed at kickstarting industrial activity, which would feed economic growth. “The fundamentals of our economy have been and continue to be strong. Our banking system is well capitalised. However, we have experienced a shrinking of liquidity to ensure that the rhythm of economic activity is not disrupted,” he said.“The RBI stands ready to respond swiftly to address the needs of the economy,” the prime minister said.He also pointed out to the guests that India had a tradition of a high rate of savings (up to 3 per cent) like most Asian countries and a dynamic private sector.“As we work to put India on a higher growth path with greater inclusiveness, India and Japan can cooperate in many ways,” he said. Describing Japan as the “economic and technological powerhouse of the world,” Singh noted that both nations were located in Asia to which the 21st century undoubtedly belongs.“Both of us have the wherewithal to become the magnate of growth in Asia and globally. India and Japan can cooperate in the coming period of global slowdown to devise counter-cyclical strategies to create a new zone of growth in the world,” the prime minister said.

Gold continues to sail in rough water

Gold futures slumped sharply today, slipping below the $750 mark on COEMX as the recent losses were seen getting extended further on continued risk aversion in the global asset markets. The US dollar has replaced Gold in the battle of the safe havens in the last few days and with the greenback convincingly hitting a 23 month high of 1.2737 against the Euro today, the tide turned in the favor of the currency quite swiftly, undermining Gold drastically in the process. The market participants seemed to have eyed the recent price action in Gold prices while sending it to the gallows even in times of utter stress in the global equities. The yellow metal had gone up formidably earlier in the month, when the COMEX futures topped a two and half month high of $936.30 per ounce. However, the decline in the yellow metal has also been quite steep afterwards, with nearly 200 dollars correction in a span of less than two weeks cluttering the sentiments for the yellow metal. COMEX Gold futures slumped to a low of $748 per ounce in the electronic trades and currently move at $754.30, down $13.70 from the previous close. MCX Gold also lost out heavily, slumping just above the key level of Rs 12000. MCX December contract rebounded from the days low of Rs 12095 to trade at Rs 12134 per 10 grams, down RS 236 or 1.91% from the previous close with 2% increase in the open interest. Meanwhile, the domestic Gold prices slumped sharply in resource to a dramatic collapse in the international prices. Local prices lost by sharply in all the major trading centers in the country. Standard Gold of 0.995 variety trade at Rs 12213 per 10 grams in Ahmedabad, down almost Rs 300 from the previous close at neared its lowest level in six weeks. Similar show was seen in Mumbai too, where pure Gold of 0.999 variety fell also fell to six week low of Rs 12256 per 10 grams.

Rupee falls

Rupee slumped to an all-time low on Wednesday before trimming losses on heavy dollar sales by state-run banks, but a slide in the stock market indicated there would be more pressure on the Indian unit. Rupee ended at 49.28/29 per dollar, 0.5 percent weaker than Tuesday's close of 49.04/06. It hit a record trough of 49.50, at which point it was down 20.4 percent in 2008.

SEBI warns FIIs again on overseas lending and borrowing

Capital market regulator SEBI has reportedly reaffirmed its disapproval of overseas lending and borrowing by foreign institutional investors (FIIs), who are eligible to issue participatory notes (PN).SEBI has told the PN issuing FIIs not to take any fresh lending and borrowing positions in the overseas markets, as it adversely affects markets in India. SEBI apparently met top PN issuing FIIs earlier today to discuss the issue of overseas lending and borrowing. It may be recalled that on Monday, the market watchdog had said that it was not pleased with FIIs allowing its foreign funds to borrow Indian shares issued under PNs and take short positions.SEBI had also said that the overseas lending and borrowing activity of FIIs was being monitored, and if necessary it would take stronger measures, as considered appropriate, to stop such transactions. On Oct. 15, SEBI had directed PN issuing FIIs and their sub-accounts to give details of the lending and borrowing activities abroad. The regulator had asked them to release the data twice a week, on Tuesday and Friday. The first such data was released by SEBI on Oct. 17 and the second set of data was released on Oct. 21.SEBI seeks to curb 'illegal' short selling by FIIs.SEBI disapproves overseas lending and borrowing by FIIs.