Sensex Drops 0.8%, Inflation Rises

Ivaylo
09 Feb, 2007
New York City

The market opened strong Friday but soon slipped into negative territory as inflation figures were released. Trading was highly volatile and the decline was broad-based. Cement, telecom, capital goods, pharma and metal stocks were under heavy selling pressure. NTPC led the few advancers, while Satyam, ACC and Reliance Comm led the decline. Wholesale inflation was at two-year high. Bajaj Auto is to be divided into separate auto and financial entities.

[R]7:30AM NY-6:30PM Mumbai Sensex declines Friday on inflationary data.[/R]
Sensex in India reached a new intra-day high of 14,724 but quickly lost the momentum and fell to close at 14,724. Weekly measure of wholesale price index fueled the fears of interest rate hike. Stocks in banks, cement and IT sectors fell. Rupee rose. Bajaj Auto soared 17% on news reports of various Bajaj related financial firms to be consolidated. Foreign investors continue to add new funds in the Mumbai market.

Trading Highlights

The 30 share index BSE Sensex lost 114 points to close at 14,538.90. In the early morning trading the index rose to a new intra-day high to 14,724 but quickly lost its upward momentum. The index traded with 466 points volatility and lost ground in the afternoon trading. Of the thirty stocks in the index only seven stocks rose and the rest declined. Market breadth was weak and in trading on BSE 622 stocks gained, 2,043 lost and only 45 stocks were unchanged.

On BSE trading market turnover declined to Rs 4,332 crore from Rs 5,136 crore in Thursday trading. According to preliminary international trading data, foreign institutions invested net of Rs 2,211 crore between February 2nd and 7th of this year.

Reliance Industries, Zee Telefim, Reliance Communication, Larsen & Toubro and State Bank of India were the most active stocks based on market turnover statistics reported by BSE daily report.

Economic News

The rising inflation index spoiled market mood. Annualized wholesale price index at the end of last week was reported at 6.58%. Inflation index in the prior week was reported at 6.11%. Rising food prices, land and housing cost and energy prices have been fueling inflation. At the end of Jan, Reserve Bank of India raised its key lending rate by 25 basis points and left the impression that future rate hikes may be necessary to curb inflation.

Stocks on the Rise

Weak trading across various market caps kept the list of stocks on the rise short.

Zee Telefim surged 5.33% to Rs 361. Oriental Bank gained 2.7% to close at Rs 232.40. CMC Limited, Punjab Llyod and Wyeth Ltd added close to 2%.

Bajaj Auto managed to close higher 1.3% to Rs 3,047 in BSE trading. Market expects that by the end of the fiscal year various subsidiaries will be consolidated under Bajaj Auto Finance. The stock of BAF rose 17% to close at Rs 432. JK Synthetic and NELCO limited surged 11% and 10% respectively.

Of the Sensex stocks, NTPC managed to gain 1.3% to close at Rs 144. Tata Motors continued its rise for the second day and rose 1.2% to close at Rs 906, Wipro advanced 0.8% to Rs 640 and HDFC added 0.7% to Rs 1,820.


Stocks on the Decline

Strengthening rupee kept information technology stocks under check. Satyam Computer lost 4%, TCS lost 1% and Infosys dropped 0.7%.

Cement stocks lost ground after gaining steadily during the week. ACC cement lost 3.5% to Rs1,032, Gujarat Ambuja dropped 1.9% to Rs 138.75 and Grasim declined 1.5% 2,815.

Inflation worries stoked fears of rising interest rates and pressured bank stocks. State Bank of India lost 0.8% to Rs 1,195, Bank of India dropped 3.3% to Rs 186 and Bank of Baroda declined 1.4% to Rs 238.

Larsen & Toubro signed an agreement to explore collaboration with European Space and Agency. The stock fell 2.3% to Rs 1,711 after rising for three days in a row.