Sensex Drops Below 15,000

123jump.com Staff
02 Aug, 2007
New York City

Sensex fell below 15,000 but stabilized after a week of volatility. Auto sales dropped in July dragging auto and motorcycles. Bajaj and Hero Honda sales fell. But, sales of Tata, Mahindra & Mahindra, Maruti sales jumped. State Bank of India plans to separate its asset management and life insurance divison.

[R]11:00AM New York, 8:30PM Mumabi – Sensex in India stabilized after a week of volatility in the Asian markets.[/R]

Sensex closed 49.93 or 0.33% 14,985.70 after a week of volatility and instability largely injected by the credit worries in the U.S. market. In the broader market 1,390 stocks advanced, 1,275 declined, and 57 companies remained unchanged. Daily turnover on the BSE fell to 4,419 crore rupees from 6,656 crore rupees.

June trade deficit jumped to $7.33 billion on 37% rise in imports to $19.2 billion and export growth of 14% to $11.87 billion.

Software services exporters fell for the third day in a row on rupee strength. Industry leader TCS fell 1.3% to 1,100 and Infosys dropped with similar losses to 1,904 rupees. Wipro declined 2.7% to 462.50 rupees and Satyam Computer decreased 1.5% to 462 rupees.

Auto stocks fell after industry reported July sales. Mahindra & Mahindra lost 3% to 673 rupees. The company unit sales gained 46% to 19,163. Maruti Udyog increased 1.7% to 835 rupees after reporting unit sales growth 25% to 57,909. Bajaj Auto edged a fraction lower on July sales drop of 7% to 185,890 and Hero Honda unit sales declined 1.3% to 201,191.

Tata Motors declined 2.2% to 652 rupees after July sales declined 6.5% to 42,098 from a year ago. The commercial vehicles sales fell 4% to 20,705 units and exports declined 17% to 4,382 units.

State Bank of India jumped 3.0% to 1,594 rupees on the news report in local media that the company is planning to separate its asset management and life insurance division. The separate company may be listed on the exchange with a potential market cap of at least 20,000 crore rupees or $5 billion.

Smaller banks advanced on the news as well. Oriental Bank of Commerce increased 3.3% followed by 1.7% rise in Bank of India, Dena Bank and Punjab National Bank.


[R]10:00AM New York, 3:00PM London – European markets across the region appear to stabilize after a week of turmoil.[/R]

European markets across the region traded higher after banks left rates unchanged meeting the forecast of most economists. With less than one hour of trading left, Germany left the region with a gain of 1.21% followed by 1% rise in France, UK, and Norway. The Netherlands, Spain, and Italy increased 0.7%.

In London trading financial stocks rally after the rates were left at 5.75%. The housing mortgage and bank stocks led the mild advance. Standard Charter Bank gained 2.5% and HBOS jumped 2.3%. Barclays advanced on higher than expected earnings.

Mitchells & Butlers plunged 5.5% after the company shelved its joint property venture spin-off citing credit market volatility. The company was planning to separate its pub properties portfolio to raise funds.

Unilever reported second quarter revenue in euros jumped 5% and net consolidated profit increased 18%. The revenue in the quarter was recorded at 10.5 billion euros and earnings of 1.21 euros. Earnings per share jumped to 40 euro cents, 18% increase from a year ago. After the news the stock gained 5%. The company guided underlying sales growth for the year to be at the upper end of its range between 3% and 5%.

On recommendations from UBS SAB Miller advanced 2.6% and Citigroup Man Group increased to 1.1%.

In Frankfurt trading stable rate decision from the ECB kept banks, telecom and retail stocks rising. Deutsche Bank increased 1.1% and Deutsche Telekom 1.5%. IKB Deutsche Industriebank plummeted 20% after the government decided to assume its faltering portfolio of 3.3 billion euros reported by local publication Die Welt.

Solarworld AG jumped 2% after reporting earnings 26.8 million euros. In the first quarter the company had reported sales gain of 60% and net income rise of 29.5%.

Fresenius Medical Care reported second quarter revenue gain of 11% and net income soared 38%. The company reported net revenue of $2.4 billion, net income of $179 million, and earnings per share of 60 cents.


[R]9:00AM New York, 2:00PM London – European banks kept interest rates unchanged.[/R]


The Bank of England kept the interest rates unchanged at 5.75% and the European Central Bank left interest rates unchanged to 4%. After several successive rate hikes in the last twelve months banks are still assessing the impact of increased interest rates on the economies of Europe and the U.K.

With the highest rates among the Group of Seven nations, UK is likely to stay put on interest rates at least for the next meeting. UK has targeted inflation rate of 2% but in the recent months inflation has exceeded that. With the rising economic growth businesses have managed to pass price hikes to customers fueling inflation to 3.1% in March before settling to 2.4% in July. Majority of the economists are project annual economic growth between 2.5% and 3% for the current fiscal year in the UK.

The 13-member nations group where euro is the currency is experiencing one of the lowest unemployment levels in decades. The rising fuel prices and falling levels of unemployment have forced bankers to keep rates high in the euro zone. The rates are likely to be revised higher after September meeting but lot depends on cost of fuel and food and widening contagion of credit losses from the U.S. to Europe. The inflation in the region has remained below 2%, banks target, but there enough inflationary pressures in the pipeline. The unemployment in the region is hovering around 6.9%.

After the news on interest rates the euro and the pound traded nearly unchanged and stock markets in the region edged up a fraction. Most market analysts and economists had factored that rates will not be revised.