Inflation Worries Sensex

123jump.com Staff
13 Aug, 2008
New York City

Mumbai stocks fell after advisory panel to prime minister indicated a need for a tighter monetary policy. Inflation is likely to persist at or above 11% for the rest of the year before dropping below 9% in the first quarter of the next year. Separately, the finance minister indicated economic growth in the current fiscal year to be at 8%, higher than estimated by private economists. Tata Steel and Vietnam form a joint venture to build 4.5 million ton steel plant with $5 billion investment.

[R]10:00AM New York, 7:30 PM Mumbai – Stocks in Mumbai fell after investors feared tighter monetary policy may curb growth. The persistent inflationary pressures are likely to hover for the rest of the year.[/R]

Market Sentiment

Indian shares were weak in today’s trading on news that the Reserve Bank may keep a tight monetary policy stance to diffuse the inflationary pressures weighing on the economy.

In Mumbai, the BSE 30-share Sensex declined 0.78% or 119.01 to 15,093.12, the CNX Nifty dropped 0.51% or 23.2 to 4529.05.

Of the stocks traded on the BSE, 1238 advanced, 1420 declined, and 91 shares were unchanged.

Trading Statistics

Daily turnover on BSE stood at 5052 crore rupees from 5,874.74 crore rupees yesterday and NSE’s futures & options turnover was 43,947.06 crore rupees from 52,461.81 crore rupees yesterday.

Reliance Infrastructure led the decliners with a fall of 1,067.85 crore rupees followed by HDFC to 2,414.10 crore rupees, Larsen & Toubro to 2,795.85 crore rupees, and Tata Power to 1,018.95 crore rupees.

Economy to Grow at 8%

Reuters News reported today that finance minister Palaniappan Chidambaram said today that India’s economy is forecasted to rise 8% in the fiscal year ending March 2009.

Separately, Bloomberg News reported today that the economic advisory panel of Prime Minister Manmohan Singh''s said the central bank needed to maintain a tight monetary policy to keep a lid on rising inflationary pressures.

According to the report, outgoing head of the panel Chakravarthi Rangarajan said inflation was likely to rise to 13%, adding that inflation is projected to increase until December before falling back between 8% and 9% by March 2009.

Economists estimate economic growth to slow to 7.7% in the fiscal year through March 2009 from 9% rise in fiscal 2008. In addition, country’s current account deficit is expected to expand to 3.2% of gross domestic product in the year to March 31 from 1.5% in the year ago period, while trade deficit is estimated to rise to 10.4% of India''s GDP from 7.7 % on record oil prices.

Gainers & Losers

Financial stocks fell on worries that the monetary authorities will heighten its tightening stance to forestall mounting inflationary pressures. ICICI Bank declined 3.77% to 710.55 rupees, Bank of Baroda slipped 4.61% to 271.30 rupees, HDFC Bank dropped 3.69% to 1217.20 rupees, and State Bank of India fell 0.15% to 1555.25 rupees.

Realty stocks fell. DLF shed 3.29% to 548.60 rupees, Mahindra Lifespace Developers tumbled 4.61% to 467.50 rupees, and Housing Development Infrastructure slid 4.05% to 466.55 rupees.

Pharmaceutical rallied in today’s trading. Sun Pharma Advanced Research Company rose 5.50% to 89.20 rupees, Glenmark Pharmaceuticals advanced 4.04% to 635.40 rupees, Divi''s Laboratories edged up 4.01% to 1593.65 rupees, and Cipla spiked 3.15% to 232.15 rupees.

Ranbaxy Laboratories declined 0.26% to 499.05 rupees.

IT stocks rose on the back of a weakened rupee against the dollar. Infosys Technologies rose 1.34% to 1625.20 rupees, TCS increased 1.20% to 828.05 rupees, Satyam Computer jumped 0.87% to 406.25 rupees, and Wipro gained 0.05% to 433.50 rupees.

Tata Steel rose 0.41% to 610.45 rupees after the company said its Singapore unit signed a joint venture agreement with Vietnam Steel Corp and Vietnam Cement Industries to build a $5 billion steel complex in the Southeast Asian country.

Infrastructure developer BSEL Infrastructure Realty rose 5% to 38.95 rupees after the company said its board will meet on August 20 to consider the funding of $100 million for ongoing and future projects of the company.

Tata to Build $5 billion Steel Plant in Vietnam

Tata reported on its Web site today that Vietnam Steel Corp, Vietnam Cement Industries Corporation (Vicem) and Tata Steel, signed a Joint Venture Agreement for the proposed steel complex in Vietnam today.

The 4.5 million ton per year steel complex will be set up in the Vung Ang Economic Zone in Ha Tinh Province. The $5 billion Integrated Steel Plant will be built in three phases, with the cold rolling mill to be commissioned by end 2010.

In the venture, Tata Steel will have a stake of 65%, Vnsteel will control 30% and Vicem will hold 5% in the Steel project.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 280.55 or 2.11% to 13,023.05, Hang Seng index in Hong Kong decreased 347.57 or 1.61% closed to 21,293.32. ASX 200 index in Australia decreased 102.00 or 2.02% to close 4,951.60. The KL Composite index in Malaysia decreased 6.25 or 0.56% closed to 1,112.53.

The Kospi Index in South Korea decreased 14.40 or 0.91% to close at 1,562.72, SET index in Thailand closed lower 1.33 or 0.19% to 701.60 and JSE Index in Indonesia increased 5.94 or 0.29% to 2,063.52. The Sensex index in India decreased 119.01 or 0.78% closed to 15,093.12.