India Falls 2%, Inflation Lower

Ivaylo
02 Mar, 2007
New York City

The Sensex lost almost 8% in the week. Today, high volatility gripped market, which moved in and out of positive territory, before finally plunging in late afternoon hours on a sell-off in large-caps. The decline was broad-based and even the drop in inflation could not inspire investors. Reliance Industries plummeted, as well cement and banking stocks. Hero Honda and Hindustan Lever led the few advancers, together with sugar stocks. Inflation declined to 6.05%.

[R]8:00AM NY-7:00PM Mumbai Sensex loses over 2% in a large-cap sell-off.[/R]
The Sensex on BSE finished 273.42, or 2.08%, lower at 12,886.13. The market-breadth was very weak as there were almost two decliners for every gainer. For 922 stocks that advanced, 1668 stocks declined and 48 stocks were unchanged. Of the 30 stocks in the Sensex, seven advanced while the rest 23 declined. The turnover on BSE was Rs 4,006.94, lower than Rs 4,397.01 crore on Thursday, while on NSE, the turnover was Rs 8,960.58, compared with Rs 10,061.04 crore on Thursday.

Economic news

Wholesale price inflation rate for the 12 months to February 17 has declined to 6.05%. In the previous week it was at 6.63%. In the week until February 3, inflation hit a two-year peak of 6.73%, forcing the RBI to increase the Cash Reserve Ratio by another 50 basis points to 6%.

The Cabinet on Thursday approved the merger of the public sector carriers Indian Airlines and Air India. The new airline company will be among the top 10 airlines in Asia and almost three times the size of its nearest rival, Jet Airways. The new entity will also have six different business units comprising maintenance, repair and overhaul, Jet shop, ground handling, engineering, cargo and low cost carriers.

Trading highlights

Reliance Industries was the most-active stocks with a turnover of Rs 186.15 crore followed by Tata Steel and Tech Mahindra.

Advancers

Hero Honda led the gainers rallying 3.7% to Rs 692. Hindustan Lever surged 1.7% to Rs 179, and Ranbaxy advanced over 1.2% to Rs 347. Firm global prices for sugar futures boosted sugar stocks. Bajaj Hindustan gained 2.4% to Rs 178.80, Balrampur Chini Mills rose 2.6% to Rs 62.10, and Bannari Amman Sugar gained 2.2% to Rs 680.

Hindalco advanced 0.5% to Rs 137.9, ahead of the company board meeting on Friday to consider a preferential issue of shares.

Decliners

Reliance Industries dipped 3.6% to Rs 1,317. The company today called a board meeting on March 10 2007, to consider the payment of interim dividend for fiscal year 2007 - year ending 31 March 2007. The company has also set March 22 2007, as a record date for paying interim dividend. The announcement comes after the finance minister lifted dividend distribution tax to 15% from 12.5% in Union Budget 2007-08. Paying dividend before the end of this financial year will ensure that Reliance will pay the existing 12.5% tax on dividend distribution.

L&T led the decliners, off nearly 5% to Rs 1,464.6. Other decliners included power equipment company BHEL shedding 3.3% to Rs 2,099.6. Cigarette large-cap ITC lost 3.5% to Rs 167. although the Budget did not bring cigarettes under value added tax as was thought. Instead, excise duty on cigarettes was lifted by 5%.

Cement shares were also down. Grasim lost 3.9% to Rs 2,070, ACC lost 2.4% to Rs 855 and Gujarat Ambuja Cements shed 1.1% to Rs 111. Telecom stocks, too, ended lower. Bharti Airtel lost 2.7% to Rs 707 and Reliance Communications shed 3% to Rs 415.3. M&M finished down 3.7% to Rs 775, although the company today launched the new Bolero, a sports utility vehicle.

Banking stocks bounced back in mid-day trade following lower inflation but the recovery was short-lived. State Bank of India plunged 4.2% to Rs 999, Oriental Bank of Commerce declined 1.9% to Rs 175.10 and Bank of India fell 1.3% to Rs 163.15. HDFC Bank dipped 3.4% to Rs 947.7.