Bank stocks lead 558-point Sensex fall as RBI hikes rates

The key benchmark indices which had posted marginal gains yesterday, 28 June 2008, ahead of monetary policy slumped sharply after the Reserve Bank of India (RBI) today, 29 July 2008, raised cash reserve ratio (CRR) by 25 basis points and repo rate by 50 basis points at quarterly review of the monetary policy. Sensex lost more than 620 points at the lowest level of the day hit in mid-afternoon trade. Weak global markets also weighed on the Indian bourses.

Rate sensitive banking, realty and auto stocks tumbled. ICICI Bank and HDFC Bank fell more than 8.5% each. Reliance Infrastructure and Maruti Suzuki India slipped more than 7% each. Reliance Industries dropped. The market breadth was weak as selling was witnessed across the board. Except BSE FMCG index all the sectoral indices on BSE declined.

Reserve Bank of India (RBI) today, 29 July 2008, raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation, now running close to 12%, and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. The central bank left its reverse repo and bank rates unchanged. The tone of the monetary policy was extremely hawkish

The 30 share BSE Sensex plunged 557.57 points or 3.89% at 13,791.54. The index lost 621.97 points at the day's low of 13,727.14, hit in mid-afternoon trade. At the day's high of 14,152.29, Sensex lost 196.82 points in mid-morning trade.

The broader based S&P CNX Nifty was down 142.25 points or 3.28% at 4,189.85. Nifty July 2008 futures were at 4194, at a premium of 4.15 points as compared to spot closing of 4189.85.

The barometer index BSE Sensex is down 6,495.45 points or 32.01% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 7,415.23 points or 34.96% away from its all-time high of 21,206.77 struck on 10 January 2008.

The BSE clocked a turnover of Rs 5,085 crore today, 29 July 2008, higher than Rs 4,632.42 crore on Monday, 28 July 2008. NSE's futures & options (F&O) segment turnover was Rs 64,804.21 crore, which was higher than Rs 45,000.90 crore on Monday, 28 July 2008. July 2008 derivatives contracts will expire on Thursday, 31 July 2008.

The BSE Mid-Cap index was down 2.53% to 5,488.58 and the BSE Small-Cap index was down 1.19% to 6,831.01.

The market breadth was weak on BSE with 963 shares advancing as compared to 1,672 that declined. 72 remained unchanged.

As per the provisioanl figures on BSE, Foreign institutional investors (FII)s sold shares worth Rs 538.27 crore and domestic funds sold shares worth Rs 254.59 crore today, 29 July 2008.

BSE Bankex (down 8.31% to 6,199.60), BSE Realty index (down 5.54% to 4,797.71), BSE Capital Goods index (down 4.92% to 11,320.60), BSE Power index (down 4.11% to 2,473.81), Auto index (down 4.04% to 3,573.21) underperformed Sensex.

BSE FMCG index (up 0.05% to 2,136.28), BSE IT index (down 0.51% to 3,588.87), BSE Consumer Durables index (down 1.07% to 3,621.63), BSE Teck index (down 1.59% to 2,934.35), BSE HealthCare (down 1.65% to 4,133.34), BSE Metal index (down 1.91% to 12,130.36),BSE PSU index (down 3.12% to 6,514.79), BSE Oil & Gas (down 3.62% to 9,303.57) outperformed Sensex.

India’s largest private sector firm by market capitalization and oil refiner Reliance Industries fell 4.31% to Rs 2,085.20 .

Capital goods stocks declined. Larsen & Toubro (down 6.52% to Rs 2,546.10), Bharat Heavy Electricals (down 3.43% to Rs 1,592.10) and Suzlon Energy (down 0.77% to Rs 212.10) edged lower.

Power stocks fell. NTPC (down 3.44% to Rs 178.45), PowerGrid Corporation of India (down 3.72% to Rs 94.45), Reliance Infrastructure (down 7.99% to Rs 908.15), Reliance Power (down 8.89% to Rs 154.15) and Tata Power Company (down 0.79% to Rs 1,043.30) edged lower.

Rate sensitive auto stocks fell. Tata Motors (down 6.84% to Rs 396.80), Maruti Suzuki India (down 7.03% to Rs 567.65), Mahindra & Mahindra (down 5.54% to Rs 500.20), Hero Honda Motors (down 4.23% to Rs 728.15) edged lower.

Rate sensitive realty stocks slipped. Indiabulls Real Estate (down 7.98% to Rs 264.05), DLF (down 5.82% to Rs 471.90) and Unitech (down 6.5% to Rs 156.80) edged lower.

Banking stocks fell. ICICI Bank (down 8.45% to Rs 607.40), State Bank of India (down 6.84% to Rs 1,321) and HDFC Bank (down 8.71% to Rs 1,028.90) edged lower. India’s largest dedicated mortgage firm by operating income HDFC fell 5.21% to Rs 2,105.65.

Jaiprakash Associates (down 5.1% to Rs 153.45), Hindalco Industries (down 4.72% to Rs 139.25), Reliance Communications (down 4.27% to Rs 490.40) edged lower from Sensex pack.

Infosys (up 0.06% to Rs 1,539.90) and Tata Consultancy Services (up 0.27% to Rs 808.35) edged higher.

India’s largest state run oil exploration firm by sales ONGC declined 3.02% to Rs 981.90. ONGC on Monday, 28 July 2008, reported 44% surge in net profit to Rs 6636 crore on 47% growth in turnover to Rs 20,123 crore in Q1 June 2008 over Q1 June 2007. The company attributed the strong performance to higher price realization on crude oil and cost management.

India’s largest drug maker by sales Ranbaxy Laboratories fell 3.84% to Rs 474.80 after the company reported 0.25% rise in consolidated net profit to Rs 160.80 crore on 13% rise in consolidated sales to Rs 1829.60 crore in Q2 June 2008 over Q2 June 2008.

Reliance Natural Resources clocked the highest volume of 1.97 crore shares on BSE. Himachal Futuristic Communications (1.51 crore shares), IFCI (1.27 crore shares), Ispat Industries (97.05 lakh shares), Polaris Lab (83.34 lakh shares) were other volume toppers in that order.

Reliance Capital clocked the highest turnover of Rs 313.40 crore on BSE. Larsen & Toubro (Rs 223.37 crore), Reliance Industries (Rs 222.27 crore), ICICI Bank (Rs 193.96 crore) and Reliance Natural Resources (Rs 178.23 crore) were other turnover toppers in that order.

In the near term, the market trend is likely to dictated by slew of events like expiry of futures & options contracts on Thursday, 31 July 2008. Besides, the progress of the monsoon and corporates quarterly numbers will also be keenly watched.

Volatility may remain high ahead of the expiry of futures & options contracts for July 2008 series on Thursday, 31 July 2008. As per reports, marketwide rollover of positions from July 2008 series to August 2008 series stood at 30%, while that of Nifty was 35%, as of Monday 28 July 2008.

US stocks tumbled on Monday, 28 July 2008, as news that federal regulators seized two more failed US banks late last week triggered a sharp sell-off in financial shares. The Dow Jones industrial average lost 239.61 points, or 2.11%, to 11,131.08. The Nasdaq composite index declined 46.31 points, or 2%, to 2,264.22. The S&P 500 index fell 23.39 points, or 1.86%, to 1,234.37.

Asian markets which opened before Indian market were weak. China's Shanghai Composite, Japan's Nikkei, Hong Kong's Hang Seng, Taiwan's Taiwan Weighted, Singapore's Straits Times and South Korea's Seoul Composite were down by between 1.19% to 3.03%.

European markets which opened after Indian markets were mixed after weak start. France’s CAC 40 and Germany’s DAX were down by between 0.76% to 1.14%. UK’s FTSE 100 rose 0.18%.

US crude gained $1.47 to settle at $124.73 a barrel yesterday, 28 July 2008 after militant attacks slashed Nigerian oil production and Iran stirred geopolitical tensions by suggesting it was rapidly expanding its nuclear program.