Sensex tanks 834 points as Reliance Power falls below IPO price on debut

Huge selling pressure was witnessed across the counters today as investors fretted over the dismal debut of Reliance Power. Weak global cues, too, weighed on bourses.

After a sharp slump, the market had witnessed recovery from lower level in mid-afternoon trade after State Bank of India, India's biggest commercial bank announced a cut in price lending rate by 25 basis points. However, the recovery proved short-lived and the market plunged again in late trade.

Reliance Energy plummeted. All the sectoral indices on BSE, barring IT index, were in the red. 26 out of 30 stocks from the Sensex pack were in the red. The market breadth was poor.

European markets, which opened after Indian markets, were subdued. Asian markets, which opened before Indian markets, were trading lower.

The 30-share BSE Sensex fell 833.98 points or 4.78% at 16,630.91. Sensex shed 1007.15 points at the day's low of 16,457.74, hit in afternoon trade.

The broader CNX S&P Nifty was down 263.35 points or 5.14% at 4857.

The Sensex shed 1508.58 points or 8.31% in last four trading session to current 16,630.91 from 18139.49 on Wednesday 6 February 2007. The current setback on the bourses has materialized despite a boost in liquidity in the secondary markets following investors getting back refunds of excess application money in the heavily subscribed Rs 11000-crore Reliance Power IPO.

The BSE Mid-Cap index fell 5.42% at 7,219.83, while the BSE Small-Cap fell 4.84% at 9,440.10. Both the indices underperformed the Sensex.

The market breadth was poor: On BSE 243 advanced as compared to 2459 that declined. 35 stocks remained unchanged.

BSE clocked a turnover of Rs 7659.43 crore compared to Friday (8 February 2008)'s Rs 6,350.14 crore.

Nifty February 2008 futures were at 4781.10, at a discount of 75.90 points as compared to spot closing of 4857.

The NSE's futures & options (F&O) segment turnover was Rs 41257.27 crore, which was higher than Rs 39421.27 crore on Friday, 8 February 2008.

Anil Dhirubhai Ambani Group firm Reliance Power settled at Rs 372.50 on BSE, a discount of 17.22% over IPO price of Rs 450. It debuted at Rs 547.80, a premium of Rs 21.73% from the IPO price. Volumes in the stock were high. On BSE, 6.38 crore shares changed hands in the counter.

Those who had invested in the Reliance Power IPO have incurred a loss of Rs 77.50 per share. Retail investors who had got a discount of Rs 20 per share, have suffered a loss of Rs 57.50 per share. Market men had initially expected the price to double on debut, but stock market turmoil had lowered investor risk appetite and expectations were toned down subsequently with market men expecting a premium of about Rs 75-to Rs 150 above the IPO price on debut. The Reliance Power IPO was subscribed 73 times.

India's largest private sector firm by market capitalization and oil refiner Reliance Industries fell 6.07% at Rs 2274.85.

India’s largest engineering and construction firm by revenue Larsen & Toubro fell 6.12% to Rs 3311.55.

Power stocks declined after investors sold power sector stocks after Reliance Power debuted below IPO price. The BSE Power index fell 8.61% at 3414.66. It underperformed the Sensex.

Reliance Energy, which holds 45% in Reliance Power, shed 19.40% to Rs 1,582.30. Torrent Power slumped 15.88% to Rs 140.60, GVK Power & Infrastructure fell 8.02% to Rs 59.60, Tata Power skid 12.26% to Rs 1174.10, CESC skid 6.60% to Rs 498.60 and Power Grid Corporation of India fell 7.10% to Rs 98.10.

The BSE Bankex fell 4.08% to 9,744.88. It outperformed the Sensex. India’s biggest private sector firm by assets ICICI Bank fell 2.91% to Rs 1035.70. Centurion Bank of Punjab slumped 7.02% to Rs 48.35, Kotak Mahindra Bank slipped 7.02% to Rs 798.90, Andhra Bank fell 6.24% to Rs 84.10, Bank of Baroda slipped 5.49% to Rs 364.90 and Axis Bank fell 5.38% to Rs 928.10.

India’s largest commercial bank State Bank of India (SBI) fell 6.67% to Rs 2045.25. State Bank of India (SBI) today reduced its benchmark prime lending rate (PLR) by 25 basis points to 12.5%. The new lending rates would be effective from 16 February 2008.

The BSE Realty index fell 6.29% to 9,168.33. It underperformed the Sensex. DLF fell 2.59% to Rs 795.55, Unitech slumped 10.41% to Rs 314.50, Indiabulls Real Estate slipped 3.49% to Rs 623.40, Phoenix Mills skid 10.55% to Rs 2279 and Omaxe fell 7.78% to Rs 248.40.

The BSE IT index rose 0.13% to 3,848.16. It outperformed the Sensex. Satyam Computer jumped 3.38% to Rs 423.85, Infosys Technologies moved up 0.48% to Rs 1558.75, TCS gained 0.36% to Rs 903.20 and Wipro inched up 0.25% to Rs 423.50.

Bio-technology firm Biocon fell 1.12% to Rs 401.40 after the company agreed to buy 70% of German drug maker AxiCorp GmbH for 30 million euros. AxiCorp is a specialised marketing and distribution firm, Biocon said in a statement to BSE on Monday, 11 February 2008.

Kemrock Industries & Exports fell 2.13% to Rs 530.10 after the company signed an agreement to buy the business of Italy's Top Glass SpA for an undisclosed.

Brokerage firm Indiabulls Financial Services fell 3.09% to Rs 629.85. Promoters of Indiabulls Financial Services have increased their stake in the company to a little over 28% by purchasing another 1.5% stake in the company for Rs 190 crore. On Friday, the promoters — Sameer Gehlaut and Rajiv Rattan — bought 18 lakh and 9 lakh shares respectively for Rs 700 per share, amounting to around Rs 190 crore.

Debutante Reliance Power clocked the highest turnover of Rs 2640.27 crore on BSE. Reliance Energy (Rs 398.99 crore), Reliance Natural Resources (Rs 361.08 crore), Reliance Industries (Rs 249.88 crore) and Reliance Petroleum (Rs 191.83 crore), were other turnover toppers on BSE in that order.

Reliance Power recorded highest volume of 6.38 crore shares on BSE. Reliance Natural Resources (2.68 crore shares), Ispat Industries (1.35 crore shares), Reliance Petroleum (1.24 crore shares) and Nagarjuna Fertilisers and Chemicals (93.79 lakh shares) were other volume toppers in that order

In Europe, key benchmark indices in UK, France and Germany were down by 0.39% to 0.85%.

Asian markets were trading lower today, 11 February 2008. Key indices in Hong Kong, Singapore and South Korea were down by 2.44%% to 3.64%. Stock markets in Japan, China, and Taiwan were closed.

US markets settled on a mixed note on Friday, 8 February 2008. The Dow Jones industrial average closed down 64.87 points, or 0.53%, at 12,182.13 on Friday. The Nasdaq Composite index rose 11.82 points to 2,304.85. The S&P 500 index slipped 5.62 points to 1,331.29.

Annual inflation based on the wholesale price index rose 4.11% in the week ended 26 January 2008 from 3.93% in the week ended 19 January 2008, government data released on Friday, 8 February 2008 showed.

Crude oil rose nearly $1 a barrel today, 11 February 2008 as Venezuela threatened to halt oil exports to the United States and bomb alerts shut down one of Britain's largest gas fields. US light crude for March delivery rose as high as $92.71 a barrel. London Brent crude rose 66 cents to $92.60.

Sensex has lost 4575.86 points or 21.57% to current 16630.91, from a record high of 21206.77 hit on 10 January 2008, due to heavy selling by FIIs amid credit crisis in the United State and fears of a US recession. Huge unwinding of positions in the futures & options segment was another key trigger for the fall.

The market turbulence has also taken a toll on new share offerings. Realty firm Emaar MGF Land withdrew its initial public offering on Friday, 8 February 2008, becoming the second Indian company in 24 hours to abandon an IPO.

Even if the US goes into the recession, it may not impact India’s economic growth in a big way given that domestic demand is a key driver of the Indian economy. India’s economy is expected to post strong growth for a long period due to favourable demographics. Moreover a healthy investment cycle will continue to support India’s growth through a self-perpetuating cycle of income creation, savings and investment.

India's economy is expected to expand at 8.7% in fiscal 2007/08, slower than 9.6% growth in 2006/07, which was its strongest pace in 18 years, government's central statistics office (CSO) said on Thursday, 7 February 2008. CSO has pegged manufacturing output growth at an annual 9.4% this fiscal compared with 12% growth in the previous year. Farm output growth is estimated at 2.6% for the full year 2007/08 compared with 3.8% growth in 2006/07. Services sector growth is estimated at 10.7% for the year against 11.1% growth in 2006/07.

Corporate earnings growth remains decent. Deutsche Bank expects 20% compounded annual growth rate in earnings of 30-Sensex firms during the period from FY 2007 (year ended 31 March 2007) to FY 2009 (year ending 31 March 2009).