Saturday, October 25, 2008
The Sensex has fallen more the 10% in a day only thrice in the last 20 years. On 21 December 1990, the Sensex fell 199.99 points 16.19% to 1034.96. Later, on 28 April 1992, the index fell 12.77% or 570.42 points to 3896.89. It had tumbled 11.14% at 4505.16 on 17 May 2004.
Today's steep fall on the domestic bourses was part of a global equities rout on worries of a sharp global economic slowdown. The sell-off was also due to disappointment from the second quarter monetary policy review by the central bank. Uncertainty on the final order with regard to short sales, also weighed on the bourses.
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%.
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.
There has been a massive erosion in investors' wealth this year. The barometer index, BSE Sensex, is down 11585.92 points or 57.11% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12505.7 points or 58.97% below its all-time high of 21,206.77 struck on 10 January 2008.
Global markets are more likely to influence the domestic bourses. Volumes may take a hit in the truncated trading week as the market remains closed on Thursday, 30 October 2008, on account of Bhaubeez. On Tuesday, 28 October 2008, market will be open for just one hour from 18:15 IST to 19:15 IST for Muhurat trading to mark the beginning of the Samvat Year 2065.
Global stocks tumbled to a new five-year low, last week, as investors withdrew from equity markets on worries that global economic slowdown may hurt corporate profitability. UK’s Gross domestic product dropped 0.5% between July and September, the first contraction in 16 years, the Office for National Statistics said today, 24 October 2008 in London. The official definition of a recession is two consecutive quarters of negative growth.
Volatility is likely to remain high as derivative contracts for October 2008 series expire on Wednesday, 29 October 2008. As per reports, Nifty had seen 37% rollover of positions from October 2008 series to November 2007, by Thursday, 23 October 2008.
The market sentiment has been badly hit by a sustained selling by foreign institutional investors (FIIs). They have been pulling out their investments from India and other emerging markets to shore up resources to beat the global liquidity crunch. In India, FII were net sellers of Rs 11,736.10 crore in October 2008 so far, till 22 October 2008, with their outflow amounting to Rs 48,527.90 crore in calendar 2008.
On the other hand, mutual funds have been buying. Their net inflow in October 2008 totaled Rs 708.90 crore, this month, till 22 October 2008.
India Inc.’s report card for the September 2008 quarter so far shows a muted bottomline growth, partly due to a surge in interest cost. Aggregate results of 652 companies showed a 7.2% rise in net profit on 29% increase in net sales in Q2 September 2008 over Q2 September 2007. Interest cost jumped 35.7% in Q2 September 2008 over Q2 September 2007
Among the frontline companies State Bank of India, Tata Power Company, Mahindra & Mahindra, Cairn India, Oil & Natural Gas Corporation, Tata Motors and Unitech will announce their September 2008 quarterly results.
Among the others companies, GMR Infrastructure, Reliance Capital, Kotak Mahindra Bank, Bharat Petroleum Corporation, Jindal Steel & Power, National Aluminium Company, Bombay Dyeing, Glenmark Pharmaceuticals, will declare their September 2008 quarterly results
Key benchmark indices extended losses for the fifth consecutive week, closely mirroring their global counterparts which tumbled to 5-year lows as fears of a looming sharp global economic slowdown shattered investors sentiment. Market edged lower in three out of five trading sessions. It was the worst weekly performance of the Sensex and Nifty in more than three years.
Back home, sustained offloading from foreign institutional investors (FIIs) and muted Q2 September 2008 corporate report added to the sell-off. FII have sold Rs 11,736.10-crore more shares than they have bought in October 2008 so far, till 22 October 2008. Their sales has reached Rs 48,527.90 crore in calendar 2008.
The BSE 30-share Sensex lost 1274.28 points or 12.77% to 8,701.07 in the week ended Friday, 24 October 2008. The S&P CNX Nifty fell 490.35 points or 15.94% to 2,584 in the week.
The BSE Mid-Cap index fell 449.16 points or 12.67% at 3,095.68 and the BSE Small-Cap index lost 506.03 points or 12.14% at 3,661.83. Both the indices outperformed the Sensex.
The barometer index BSE Sensex is down 11,585.92 points or 57.11% in the calendar year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 12,505.70 points or 58.97% below its all-time high of 21,206.77 struck on 10 January 2008.
Trading for the week started on positive note after the Reserve Bank of India (RBI), on Monday, 20 October 2008 announced a 100 basis points cut in repo rate to 8%, with immediate effect. 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. The BSE 30-share Sensex gained 247.74 points or 2.48% to 10,223.09 and the S&P CNX Nifty was up 48.45 points or 1.58% to 3,122.80, on that day.
Market extended gains on Tuesday, 21 October 2008, boosted by an overnight central bank's repo rate cut, positive global markets and short covering after the regulator Securities & Exchange Board of India (Sebi) warned foreign funds against overseas lending and borrowing of Indian securities. The BSE 30-share Sensex rose 460.30 points or 4.5% to 10,683.39 and the S&P CNX Nifty was up 112.10 points or 3.59% to 3,234.90, on that day.
Weak global markets, cautious outlook by IT major Wipro and sustained selling by foreign funds played the spoilsport on Wednesday, 22 October 2008. The BSE 30-share Sensex lost 513.49 points or 4.81% to 10,169.90 and the S&P CNX Nifty was down 169.75 points or 5.25% to 3,065.15, on that day.
Stock suffered setback in highly choppy trade on Thursday, 23 October 2008. 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, triggered a solid intra-day pullback after early slide caused by weak global cues. The BSE 30-share Sensex lost 398.20 points or 3.92% to 9.771.70 and the S&P CNX Nifty slipped 122 points or 3.98% to 2,943.15, on that day.
Global equities rout on worries about a sharp global economic slowdown and second disappointing quarter monetary policy review by the central bank led carnage on the domestic bourses, on Friday 24 October 2008, pulling them to near three low. The BSE 30-share Sensex slumped 1070.63 points or 10.96% to 8,701.07, its lowest closing since 24 November 2005. The S&P CNX Nifty lost 359.15 points or 12.20% to 2,584, its lowest closing since 14 November 2005.
Banking stocks slumped as the central bank did not announce any measures to boost liquidity at the policy review announced on Friday, 24 October 2008.
India’s largest state-run bank by net profit State Bank of India lost 18.22% to Rs 1156.35 in the week. ICICI Bank, the country’s largest private sector bank by net profit slipped 20.86% to Rs 310.
HDFC Bank, the country’s second largest private sector bank by net profit fell 5.02% to Rs 972.65. The bank's net profit rose 43.2% to Rs 527.98 crore on 62.8% growth in total income to Rs 4,634.32 crore in Q2 September 2008 over Q2 September 2007.
India’s largest private sector company by market capitalization and oil refiner Reliance Industries plunged 22.20% to Rs 1015.50 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.
India’s largest electric equipment maker by sales Bharat Heavy Electricals slipped 8.62% to Rs 1091.75. On 24 October 2008, the company reported 10.4% fall in net profit 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.
India’s largest drug maker by sales Ranbaxy Laboratories slumped 26.25% to Rs 188.95. Japan's Daiichi Sankyo has acquired 52.5% of Ranbaxy Laboratories making the Indian firm a subsidiary, the two companies said in a joint statement on 20 October 2008. Daiichi Sankyo bought shares from Ranbaxy's founders and through an open offer from other shareholders. It also subscribed to shares and warrants worth $736 million. Daiichi Sankyo had agreed in June 2008 to take over Ranbaxy in a deal worth up to $4.6 billion.
IT stocks were mixed. India’s third largest IT exporter by sales Satyam Computer Services rose 7.86% to Rs 286.65. 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 fourth largest IT exporter by sales Wipro fell 8.72% to Rs 235.15 after it said on 22 October 2008 the outlook is cautious in the near term given the extent of strain on the global economy. Wipro reported 56.13% spurt in net profit to Rs 852.50 crore on a 15.48% increase in total income to Rs 5551.60 crore in Q2 September 2008 over Q1 June 2008.
India’s biggest software exporter by sales TCS rose 7.94% to Rs 490.20. On 22 October 2008, the company reported 2.57% decline in net profit 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 second largest software exporter by sales Infosys Technologies rose 3.84% to Rs 1248.75 on reports it bagged an order worth $10-15 million from the Union Bank of California, US, for implementing core banking solution (CBS) Finacle.
India’s largest steel maker by sales Tata Steel plunged 28.16% to Rs 178.30 after Moody's Investors Service on 23 October 2008 lowered outlook on corporate family rating to negative from stable due to weak operating environment at its UK unit.
Telecom stocks fell on reports they may have to shell out Rs 6,000 crore for failing to verify their customers. India's largest telecom services provider by market share Bharti Airtel slipped 21.03% to Rs 534.45. India's second largest telecom services provider by market capitalisation Reliance Communications fell 17.33% to Rs 193.40.
The Reserve Bank of India (RBI) kept the bank rate, repo rate, reverse repo rate and cash reserve ratio unchanged in a mid term review of Annual Policy for the Year 2008-09 on 24 October 2008. RBI also revised India's GDP growth projection for FY 2008-09 to a range of 7.5 to 8%, down from its own earlier projection of around 8% in July 2008. Inflation target was also kept unchanged at 7% by end March 2009.
Ahead of the policy review, the Reserve Bank of India cut repo rate by 100 basis points to 8% with immediate effect 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.
The government and the Reserve Bank of India (RBI) late on Wednesday, 22 October 2008, relaxed overseas borrowing norms for corporates. According to the new rules notified by the RBI, external commercial borrowings (ECBs) 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.
Oil Minister Murli Deora on 23 October 2008 said the government is watching crude price and will decide in a week if fuel prices should be cut. US crude oil has fallen sharply from a record of above $147 in July 2008.
On 20 October 2008, Prime Minister Manmohan Singh said the economic growth may decelerate to 7.5% in 2008-09, as the country experienced "ripple effects" of the global financial crisis and liquidity crunch. The financial crisis is likely to have an indirect impact on the Indian economy, he said in the parliament. Singh said the recent steps taken by the government and central bank would help ease a liquidity shortage. Inflation was also expected to moderate further in the next two months, he added.
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.
Infotech Enterprises, Patni Computers, Jagran Prakashan, ACC, Punj Lloyd, Madhucon Projects, Cummins, Voltas, Hotel Leela, Everest Kanto
Infotech Enterprises, Patni Computers, Jagran Prakashan, ACC, Punj Lloyd, Madhucon Projects, Cummins, Voltas, Hotel Leela, Everest Kanto, Gateway Distripaks, Sesa Goa
With the stock market benchmark Sensex breaking over a dozen thousand-point milestones in less than a year of downslide, the market experts now believe that even a fall below 5,000-point mark could not be ruled out.
The Sensex today fell below 9,000-point mark for the first time in about two and half years to close at 8,701.07 points, but the experts said the bottom of the current bear- rampage on the bourses is yet to come.
After today's fall of 1,071 points -- steepest ever after a 1,408-point crash on January 21 -- the Sensex has plummeted by as many as 12,500 points from its record high of 21,206.77 points scaled on January 10.
The experts said that more pain could be in store for the Indian market as there are no signs of recovery in global markets and the panic has spread even further after reports of economic giants like the US and the UK heading towards an imminent recession.
"In the current scenario, everything is possible. The current free-fall in the market and the rate of fall can witness the 5,000 levels in another six months," Taurus Mutual Fund Managing Director R K Gupta said.
There could may be slight recovery in the coming weeks, but only to be followed by further losses, Gupta said, adding that as long as the bailout does not come for the global economy as a whole, the concerns of recession would continue pulling domestic market down.
"There is sheer panic selling and frustration in the market. No body knows where is the end and when it will end. However, one thing is clear, the bottom has not yet been established," Kejriwal Research and Investment Services (KRIS) official Arun Kejriwal said.
Bonanza Portfolio's President (Research) P K Agarwal also said the market has not touched its bottom as yet, although it could be close to that level.
The next time Forbes announces its list of billionaires (assuming it dares to do so even amid a massive wealth destruction globally),
chances are that many Indian tycoons will find to their dismay that their rankings have slipped a few notches.
Even if they managed to retain their slots, or even climb up a few rungs, it would still be cold comfort, as few billion of their wealth would evaporate amid the ongoing turmoil in the stock market
As the late British financier Sir James Goldsmith remarked when congratulated for cashing out before the stock market crash of 1987, "It is like winning a game of bridge on the decks of the Titanic."
The Sensex recorded the second-biggest single-day fall in absolute terms on Friday when it crashed by 1,071 points, or 11%, to close at 8,701. With this, the index has crashed more than 12,000 points, or nearly 60%, since its peak of 20,873 achieved on January 8, 2008.
Market cap of all the companies traded on the Bombay Stock Exchange
(BSE) has evaporated by a staggering Rs 46 lakh crore, or $940bn during the period. So, how poorer have top industrialists like the Ambanis, Tatas and Birlas become after the meltdown in the share prices of their companies?
An ET analysis of promoter wealth loss between January 8 and October 24, 2008, shows that the two Ambani brothers bore the brunt of the stock market mayhem, witnessing the highest wealth erosion among promoters of the top business houses in the country.
Though still dominating the market cap ranking, RIL chairman Mukesh Ambani saw his personal wealth crash from $57.6bn as on January 8 to $14.4bn as on Friday, a fall of 75% since January 8.
A major part of the wealth erosion happened in the flagship company, RIL, whose market cap has declined by Rs 2.8 lakh crore, or $57bn. The market cap of two other group companies Reliance Petroleum and Reliance Industrial Infrastructure fell by $15.3bn and $0.7bn during the period.
Mukesh’s younger brother Anil Ambani of the ADAG group saw his wealth tumble from $48.4bn to $8.4bn, a loss of 83%. His five companies, Reliance Communication, Reliance Capital, RNRL, Reliance Infrastructure and Adlabs Films, recorded an aggregate market cap loss of $53.7bn.
Realty major DLF is the third-biggest loser where the promoter wealth has eroded from $44bn to as low as $6bn. DLF is followed by Tatas who saw their wealth in 27 listed companies plunge from $38.2bn to $12.8bn, a loss of 67%.
TCS, Tata Motors, Tata Power, Tata Communications and Tata Teleservices are among the key companies in the Tata group to have taken a big hit on market cap during January 8 to October 24 2008.
The top gainers: The largest gainers in the Sensex were TCS (up 9.9%), Satyam (up 7.9%) and Infosys (up 3.6%).
The top losers: The largest losers in Sensex were Tata Motors (down 33.2%), Hindalco (down 32.1%), DLF (down 29.9%), Tata Steel (down 28.1%) and Ranbaxy (down 26.6%).
The BSE IT Index (up 2.4%): In such a disastrous week, the BSE IT index out performed the main indices and turned out being the only index to finish the week with handsome gains.
The largest gainers in IT space were TCS (up 9.9%), Satyam (up 7.9%), Infosys (up 3.6%), Mphasis (up 1.7%) and Oracle Financials (up 0.5%).
On the other hand, the largest losers were Financial Tech (down 21.5%), Patni (down 14.2%), HCL (down 12.7%), Wipro (down 8.7%) and Sasken Communication (down 2%).
The Realty Sector (down 31%): The BSE Realty index was the worst hit sector. The largest losers in the real estate space were Unitech (down 61.1%), Parsvnath (down 36%), DLF (down 29.9%), Ansal Properties (down 22.5%), Anant Raj Industries (down 21%), Sobha Developers (down 14.6%), Peninsula Land (down 14.4%) and Mahindra Lifespace (down 13%).
However, bucking the negative trend was HDIL, the stock rose over 9.4%. Akruti City up marginally by 0.3% during the week.
The Metals sector (down 24.3%): The metal stocks were under immense pressure on fears of demand destruction and steep correction in prices.
The top losers in the metals space were Jindal Stainless (down 35.5%), Tata Steel (down 28.1%), SAIL (down 26.2%), Jindal Steel (down 21%), Sunflag Iron (down 18.6%), Bhushan Steel (down 7.7%) and Bhuwalka Steel (down 6.6%).
The BSE Oil & Gas Index (down 20.5%): The top losers in the oil & gas sector were Essar Oil (down 28.7%), Jindal Drilling (down 28.1%), HOEC (down 27.2%), RPL (down 25%), IOC (down 15.4%) and ONGC (down 15.2%) and Reliance Industries fell 21.9%. The company announced that it posted a net profit after tax of Rs41.22bn in the quarter ended September 30, 2008 compared to Rs38.37bn in the same quarter a year earlier. Total income for the quarter increased to Rs449bn in the quarter ended September 30, 2008 from Rs322.11bn in the quarter ended September 30, 2007.
The BSE Auto Index (down 20%): The top losers in auto space were M&M (down 34.7%), Tata Motors (down 33.2%), Punjab Tractors (down 29%), Swaraj Mazda (down 16.5%), Maruti (down 16%), Eicher Motors (down 15.3%), Ashok Leyland (down 15.4%) and Bajaj Auto Ltd (down 11.2%).
The BSE Banking Index (down 16.2%): The top losers in the banking space were Kotak Bank (down 30.9%), Bank of India (down 24.1%), Allahabad Bank (down 22.3%), Andhra Bank (down 21.5%), ICICI Bank (down 21.2%), Axis Bank (down 13.1%) and IOB (down 13.1%).
The RBI left all policy rates unchanged and also kept the CRR and SLR norms steady.
The RBI maintained its repurchase rate (Repo Rate) at 8% after lowering the benchmark by 100bps on Oct. 20. It has also slashed the CRR by 250 basis points in the past fortnight to 6.5% and allowed a leeway of 1.5% on the SLR to ease the credit crunch in the local markets.
The BSE Healthcare Index (down 12.4%): The top losers in the pharma space were Orchid Chemical (down 29.6%), Glenmark Pharma (down 29.6%), Panacea Biotec (down 29.2%), Nicholas Piramal (down 27.5%) and Ranbaxy (down 26.6%).
The BSE Capital Goods Index (down 8.7%): The top losers in capital goods space were Jyoti Structures (down 26.9%), Aban Offshore (down 25.7%), ABB (down 22.7%), Praj Industries (down 20.1%) and Gammon India (down 15.1%).
On the other hand, among the major gainers was Alfa-Laval India. The stock was up by over 23% during the week after its parent company announced a public offer to increase its share in Alfa Laval (India) Ltd. The intention is to increase the holding with approximately 13% to approximately 90% through this offer.
Among the other major gainers were Kirloskar Brothers (up 20.4%), SKF India (up 16.4%) and Esab India (up 0.4%).
The BSE Consumer Index: The largest losers in consumer durables were Samtel Color (down 17%), Su-Raj Diamonds (down 12%), MIRC Electronics (down 9.1%), Whirlpool (down 4.6%) and Blue Star (down 1.1%).
The Cement Sector: The top losers in the cement sector were Binani Industries (down 23.2%), Mangalam Cement (down 21.9%), Gujarat Sidhee (down 20.7%), JK Cements (down 20.6%), India Cements (down 19.9%), Prism Cement (down 15.1%) and Birla Corp Ltd (down 13.8%).
The Telecom Sector: The top losers among the telecom stocks were Idea (down 41.7%), Shyam Telecom (down 25%), WWIL (down 21.8%), Bharti Airtel (down 20.7%), RCom (down 17.5%), Tata Communication (down 16.4%) and TTML (down 16.1%).