Sensex slides 3.4% in two days on Dubai debt problems

Key benchmark indices staged a strong comeback in second half of the day's trading session after suffering a severe setback in the first half. A recovery in European stocks from an initial slide and news that China has pledged to stick with a pro-growth stance in 2010, aided the recovery. The BSE 30-share Sensex lost 222.92 points or 1.32%, up 421.57 points from the day's low and off 86.97 points from the day's high.

The barometer index has lost 566.94 points or 3.41% in the past two trading sessions on worries about Dubai's debt problems. Debt worries in Dubai sparked fears that the global financial markets have not healed properly since last year's crisis and that the Dubai problem could expose these weaknesses.

Trading in US index futures showed the Dow could fall 203 points the opening bell today, 27 November 2009. At one point of time, the Dow futures were down more than 300 points. US financial markets were closed on Thursday, 26 November 2009, for the Thanksgiving holiday.

Index heavyweights Reliance Industries, ICICI Bank and Bharati Airtel played lead role in the strong intraday recovery on the domestic bourses today. Auto, banking and infrastructure shares rebounded from early lows. But the market breadth was weak.

Intraday volatility was high. The market cut losses after a sharp setback in early trade. However, the intraday rebound proved short-lived. The market weakened again later. Fresh selling pulled the market to fresh intraday low later. The market staged a solid intraday rebound in mid-afternoon trade.

Dubai said on Wednesday, 25 November 2009, it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate's breakneck growth. Dubai World had $59 billion in liabilities as of August 2009.

India and the United Arab Emirates (UAE), of which Dubai is a member, are separated by the Arabian Sea and closely linked by the millions of Indians who work in the region. Indians make up about 40% of the UAE's population, accounting for 10% to 12% of India's inward remittances, according to report by a foreign brokerage. But Finance Secretary Ashok Chawla said on Friday Dubai debt worries are unlikely to impact remittances from the region.

The UAE was the second-biggest export destination for India during the nine months through December 2008, accounting for $14.6 billion, or 11.15% of India's total - a share that has been rising and closing in on the United States. But Trade Minister Anand Sharma said India's economy is unlikely to be hard-hit by the situation in Dubai as India is a very large economy. Meanwhile, total exports from India fell 6.6% in October 2009 over the previous year, Sharma said today.

The Reserve Bank of India (RBI) governor D Subbarao on Friday 27 November 2009 said an assessment of the impact of Dubai's debt problems was needed before deciding on a response. India's financial integration with the global economy is deeper than its trade integration, the central bank governor said.

Many Indian companies were also quick to play down their exposure to Dubai on Friday, 27 November 2009. Engineering conglomerate Larsen & Toubro said it had exposure to Dubai of $20 million to $25 million. India's largest listed realty firm, DLF, and second ranked Unitech said they had no exposure to Dubai, and leading private bank ICICI Bank said it had no material exposure. While Indian banks are heavily focused on the domestic market, they are active in handling remittances from overseas workers. State-run Bank of Baroda (BoB) has exposure of 7-8% of its loan book in the United Arab Emirates. BoB said the assets are good performing assets

Subbarao today said that there was no benign policy option and that inflationary pressures were building up. The government on Thursday said it was concerned about rising prices, especially of food articles, and would take appropriate fiscal and monetary measures to contain them. "We are deeply concerned when prices go high," Finance Minister Pranab Mukherjee said on Thursday. "It will have to be done by us: control of monetary policy, control of credit policy, control of fiscal policy."

The food price index rose 15.58% and primary article index rose 11.04% in 12 months to 14 November 2009, data released by the government on Thursday showed. The fuel price index declined 1.51%.

The worst dry spell in nearly four decades and floods in parts of the country have hurt farm output and pushed up food prices. C. Rangarajan, Chairman of Prime Minister Manmohan Singh's Economic Advisory Council, recently said food price inflation is the biggest worry for the economy in near term and a strong rise in food prices could prompt monetary action. Inflation based on the wholesale price index rose 1.34% in October 2009 from a year earlier

Meanwhile, China gave no sign on Friday that it was planning an early exit from its stimulus policies, pledging to stick with a pro-growth stance in 2010 to cushion the fallout of the global financial crisis. A meeting of the ruling Communist Party reaffirmed the relatively loose monetary setting and active fiscal policy that China adopted a year ago as the crisis reached its peak, but said there was a need to implement policy flexibly.

The party's decision-making Politburo pledged to make growth more stable, more sustainable and more balanced, the official Xinhua news agency reported. To that end, China would promote sustainable domestic demand, especially consumption and private investment, increase imports and encourage companies to invest abroad

Closer home, the six core industries grew 3.5% in October 2009 from a year earlier, slower than upwardly revised annual growth of 4.1% in September 2009, government data showed on Friday. During April-October, the first half of the 2009/10 fiscal year, output rose 4.7% from 3.3% in the same period in 2008/09. The infrastructure sector accounts for 26.7 percent of India's industrial output.

European shares moved off early lows on Friday, with banks paring losses and autos gaining ground. Key benchmark indices in UK and Germany were down 0.23% to 0.13% respectively. France CAC 40 index rose 0.12%

Asian stocks extended Thursday's slide as Dubai's debt concerns triggered worries about the global financial system. Key benchmark indices in China, Hong Kong, Singapore, Japan, South Korea and Taiwan fell by between 1.10% to 4.84%.

Japan's unemployment rate in October 2009 unexpectedly fell for a third month, a sign that the worst may be over for the labor market. The jobless rate declined to 5.1%, the statistics bureau said today in Tokyo. The rate has been declining since reaching a postwar high of 5.7 percent in July 2009. Household spending rose 1.6% in October 2009 from a year ago, a separate report showed.

Taiwan's gross domestic product (GDP) decreased 1.29% year-on-year in the third quarter, the Directorate General of Budget, Accounting and Statistics said on Thursday. The GDP was down 6.85% annually in the second quarter, revised from a 7.54% decrease estimated initially. The first quarter GDP was revised up to 9.06% from a decline of 10.13%. Taiwan's GDP has been falling since the third quarter of 2008 and the economy fell into a recession in the fourth quarter

Back home, signaling a sustained recovery in consumer sentiments, the domestic personal computer (PC) shipments touched 21.9 lakh units during July-September 2009 quarter, a 24% growth over the previous quarter. But seen on a year-on-year basis, the overall PC shipment was almost 3% lower than that in the same period the previous year.

Meanwhile, as per reports, the government plans to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. Currently, voting rights of foreign investors are capped at 10%.

There are concerns that a glut in share sales may suck liquidity from the secondary market. A foreign brokerage firm expects Indian firms to raise roughly $70 billion through share sales over the next three years. The brokerage expects stake sales in state-run firms will account for $10-$15 billion of the total funds to be raised. The upcoming auction of third-generation mobile spectrum will also spur potentially billions of dollars in equity raising, although not necessarily from the public markets.

Indian companies have raised about $18 billion in equity thus far this year to repay high cost debt or to fund expansion plans. Last year, Indian firms raised $7.2 billion in equity.

The BSE 30-share Sensex was down 222.92 points or 1.32% to 16,632.01. The Sensex opened 136.13 points lower at 16,718.80, also its day's high. It lost 644.49 points at the day's low of 16,210.44 in afternoon trade. The Sensex oscillated 508.36 points during the day.

The S&P CNX Nifty was down 63.80 points or 1.27% to 4941.75. Nifty December 2009 futures were at 4953, at a premium of 11.25 points compared with the spot closing.

Turnover in NSE's futures & options (F&O) segment declined to Rs 96075.18 crore from a record turnover of Rs 137130.38 crore on Thursday, 26 November 2009.

Derivative contracts for November 2009 series expired on Thursday, 26 November 2009. As per reports, rollover of Nifty positions was about 70% while market wide rollover stood at 75%.

A deluge of global liquidity has boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex is up 6984.70 points or 72.40% in calendar year 2009, as on 27 November 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex is up 8471.61 points or 103.81% as on 27 November 2009.

The BSE Mid-Cap index fell 1.35% and the BSE Small-cap index fell 2.14%. Both the indices underperformed the Sensex.

All sectoral indices on BSE ended lower except the BSE Healthcare index. The BSE Bankex (down 1.41%), the BSE IT index (down 2.20%), the BSE Capital Goods index (down 1.82%), underperformed the Sensex.

The BSE Consumer Durables index (down 0.35%), the BSE Realty index (down 0.55%), the BSE Oil & Gas index (down 1.06%), the BSE PSU index (down 1.22%), the BSE FMCG index (down 1.20%), the BSE Healthcare index (up 0.08%), the BSE Teck index (down 1.63%), the BSE Metal index (down 1.30%), the BSE Power index (down 0.73%), the BSE Auto index (down 0.41%), outperformed the Sensex.

The market breadth, indicating the overall health of the market was weak. On BSE, 2029 shares declined as compared with 796 that rose. A total of 53 shares remained unchanged.

The total turnover on BSE amounted to Rs 5334 crore, higher than Rs 4508 crore on Thursday

Among the 30-member Sensex pack, 25 declined while only 5 of them managed gains.

Infrastructure shares were the worst hit in today's market meltdown. India's largest dam builder Jaiprakash Associates lost 3.05% to Rs 214.50 and was the top loser from the Sensex pack. Nevertheless the stock recovered from day's low of Rs 205.55 after company said it does not have any project or borrowing in Dubai.

India's largest engineering and construction firm by sales Larsen & Toubro slumped 2.80% to Rs 1585 after declining to a low of Rs 1530. The company's exposure to Dubai is in the range of $20 million to $25 million, a senior company official told a television channel on Friday.

Real estate shares staged a sharp recovery from early lows. India's largest real estate firm by sales DLF fell 1.06% after the company said it has no exposure to Dubai.

India's second largest listed real estate firm Unitech's rose 2.52 % after the company said it has no exposure to Dubai.

Cement shares declined despite reports of hike in prices by Rs 8-10 in Maharashtra and Gujarat. Sanjay Ladiwala, the president of Cement Stockists and Dealers Association of Mumbai was quoted as saying that the price rise was due navailability of railway wagons.

ACC (down 0.89%), Ambuja Cements (down 3.37%), UltraTech Cement (down 0.60%), and India Cement (down 2.05%), declined.

Siemens tanked 5.84% after net profit fell 32.7% to Rs 151.54 crore on 2.5% rise in sales to Rs 2482.05 crore in Q4 September 2009 over Q4 September 2008. The result was announced after trading hours on Thursday, 26 November 2009.

Suzlon Energy jumped 7.39% after the company said its unit REpower Systems AG has signed a set of wind farm project contracts with EDF Energies Nouvelles and RES Canada for delivery of up to 954 megawatt. The announcement was made before trading hours today, 27 November 2009.

Voltas rose 0.15% after the firm's chief financial officer told the media that the company is executing a Rs 900-crore project in Dubai through a joint venture in which Voltas has 37% stake.

Punj Lloyd fell 1.89% after a company official told the media that United Arab Emirates and Libya account for 40% of the company's order book.

India's second largest private sector power generation firm by sales Tata Power fell 0.31% after consolidated net profit fell 30% to Rs 367.7 crore in Q2 September 2009 over Q2 September 2008.

India's largest private sector firm by market capitialisation Reliance Industries (RIL) lost 0.67% to Rs 1057.50, recovering from day's low of Rs 1011.25. RIL has reportedly offered between US$10 billion and US$12 billion for acquiring LyondellBasell Industries.

India's largest power generation firm NTPC fell 0.97%. The Bombay High Court, on Wednesday, held that it will frame additional issues for the trial in a dispute for gas supply between state-run NTPC and Reliance Industries (RIL) on 4 December 2009. Justice Anoop Mohta has asked the parties to decide which documents submitted by either of them will be admitted or denied by the other

Shares of state-run oil marketing companies rose after crude oil futures tumbled in Asia Friday, as concerns about the global economic recovery and oil demand were re-ignited by the debt crisis in Dubai.

Hindustan Petroleum Corporation (HPCL) (up 0.31%), Indian Oil Corporation (IOC) (up 0.19%) and Bharat Petroleum Corporation (BPCL) (up 1.84%), edged higher.

Fall in crude oil prices will reduce under-recoveries of state-run oil firms on domestic sale of petrol, diesel, LPG and kerosene at a controlled price.

Software pivotals slipped on selling pressure despite weak rupee. A weak rupee boosts revenues of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

India's second largest software exporter Infosys fell 2.47%. As per recent reports the company is reportedly considering acquiring companies in the consulting and health-care industries for as much as $500 million.

Other IT pivotals also edged lower on selling pressure. India's third largest software exporter Wipro declined 1.76%. India's largest software exporter TCS fell 2.49%.

The rupee was trading at 46.64/65 as compared with previous close of 46.45.

Auto stocks recovered from day's low on bargain hunting. India's top two wheeler maker by sales Hero Honda Motors rose 0.95% to Rs 1753 and was the top gainer from the Sensex pack. The stock recovered from low of Rs 1677.

India's largest small car marker by sales Maruti Suzuki India dipped 1.68% to Rs 1553.10, off day's low of Rs 1510. India's top tractor market by sales Mahindra & Mahindra shed 1.27% to Rs 1013.80 after sliding day's low of Rs 990.70

India's top truck maker by sales Tata Motors pared early losses and ended 0.69% lower at Rs 630.50 after the company reported a consolidated net profit of Rs 21.78 crore in Q2 September 2009 compared with a consolidated net loss of Rs 941.75 in Q2 September 2008. Consolidated total income declined 8.20% to Rs 21506.94 crore in Q2 September 2009 over Q2 September 2008. The results were announced during trading hours today, 27 November 2009.

Private sector banking pivotals extended fall for the second day despite reports indicating that the government plans to move a bill early next year to amend a banking law for allowing foreign investors in private banks to have voting rights in proportion to their shareholdings. Currently, voting rights of foreign investors are capped at 10%.

India's largest private sector bank by net profit ICICI Bank slipped 1.84% to Rs 849.60. Nevertheless, the stock rebounded sharply from day's low of Rs 810 after a bank spokesman said that it had no material exposure to Dubai corporates. ICICI Bank said the bank has no material non-India linked exposure to Dubai corporates.

India's second largest private sector bank by net profit HDFC Bank shed 0.44%. India's largest bank by net profit State Bank of India declined 0.36%.

Metal stocks declined after a gauge of six metals traded on the London Metal Exchange, fell 2.18% on Thursday, 26 November 2009. Sterlite Industries (down 1.89%), Hindustan Zinc (down 4.88%), Sesa Goa (down 4.62%), slipped.

India's largest private sector steel marker by sales Tata Steel slipped 0.08%. The company reported consolidated net loss of Rs 2707 crore in Q2 September 2009 as compared with a net profit of Rs 4772 crore in Q2 September 2008. Net sales dropped 42.82% to Rs 25270 crore in Q2 September 2009 over in Q2 September 2008. The results were announced during market hours on 26 November 2009.

India's largest private sector aluminium maker by sales Hindalco Industries rose 0.60% after the Reserve Bank of India allowed the company to enhance foreign institutional investors (FII) limit to 40%.

India's largest cellular services provider by sales Bharti Airtel rose 0.89% to Rs 283.50. The stock oscillated in a wide band of Rs 229.50-Rs 284.45 during the day. The company's chairman Sunil Mittal in a television interview said the company has no plans to cut SMS charges as of now and also ruled out any global acquisitions at present.

India's second largest cellular services provider by sales Reliance Communication (RCom) fell 1.18% after the company slashed SMS charges, further heating up an ongoing price war in the telecom market.

RCom said it would charge customers just 1 paisa per SMS in a new bill plan. The company also launched another plan where customers can send unlimited text messages by paying Re 1 per day. Currently mobile operators charge Re 1 for local SMSes.

Select pharma shares gained on defensive buying. India's largest pharma company by sales Ranbaxy Laboratories rose 2.92% after the company launched a generic version of GlaxoSmithKline's Valtrex in the United States with a 180-day marketing exclusivity.

Wockhardt (up 0.94%), and Cipla (up 0.79%), edged higher from the pharma pack.

Sun Pharmaceutical Industries fell 0.29% to Rs 1459.05 on profit booking. The stock rose to day's high of Rs 1490 after the company received tentative approval from US Food and Drug Administration for generic Strattera capsules. The announcement was made after trading hours on Thursday, 26 November 2009.

Rajesh Exports fell 1.99% after the company's chief told the media that the Dubai crisis will affect the business as a whole but further informed that the company is not in any direct threat of payment defaults.

Tata Communications spurted 5.63% to Rs 382.05. The company recently signed a pact with five Middle East telecommunications companies to build a new cable system that will connect the region to the rest of the world. The five companies are Bahrain Internet Exchange, Oman's Nawras, Qatar Telecom Q.S.C., Saudi Arabia's Mobily and United Arab Emirates' Etisalat. It did not provide financial terms of the pact.

Tata Steel was the top traded counter on the BSE with a turnover of Rs 249.11 crore followed by HDIL (Rs 207.67 crore), Suzlon Energy (Rs 194.63 crore), State Bank of India (Rs 187.93 crore) and Reliance Industries (Rs 176.36 crore).

Suzlon Energy led the volumes charts on BSE clocking volume of 2.74 crore shares followed by Cals Refineries (2.60 crore shares), Unitech (1.52 crore), Mahindra Satyam (1.18 crore shares) and IFCI (1.08 crore shares).