Political Worries Dominated India

123jump.com Staff
08 Oct, 2007
New York City

Sensex in India declined for the third day in a row after a steady rise in the previous ten sessions. Sensex fell 1.6% on the worries that the disagreement in the ruling coalition on the nulcear accord with the U.S. may lead to early elections. The Congree led coalition has been shaky but has managed to push ahead with reforms and economic growth has stayed above 9%. DLF will replace Dr Reddys in the BSE Sensex index. Steel companies led the gainers.

[R]11:00AM New York, 8:30PM Mumbai - Sensex retreated 1.6% as political disagreement between Communists parties and the Congress party on the nuclear accord with the U.S. dominated the news.[/R]

Sensex in Mumbai opened the week weaker for the third day in a row on the political worries.

The ruling party coalition led by Congress party president Sonia Gandhi said on Sunday that her party was ready for the polls and blamed opponents of the nuclear deal with the U.S. against peace and development. She said that the country has to maintain a rate of growth in the power generation to support economic growth. In a joint statement issued by three parties CPI, CPI – M, and RSP said that “the nuclear deal with the United States is against the interests of India. Those who advocate the deal should know that India is capable of developing nuclear energy primarily on a self-reliant basis. We need not surrender our vital interests to America on this plea.”

BJP, the largest party in parliament, and not part of the ruling coalition opposes the agreement with the U.S. as well.

Investors are worried that early election may derail the economic reform and lower the economic growth and hurt company earnings.

The Sensex lost 1.6% or 282 to 17.491.39. The CNX Nifty closed down at 1.9% or 100.6 to 5,085. Of the shares traded on BSE 450 gained, 2,252 fell while 371 remained unchanged.

The BSE has announced that DLF will be included in the Sensex, from November 19th. In a circular, BSE said DLF would replace Dr Reddy''s on the Sensex.

Of the Sensex 30-shares 7 socks were up while the rest declined. The BSE net turnover fell to 7,206 crore rupees. The NSE clocked a turnover of 15,996.36 crore rupees.

Reserve Bank of India governor on Monday said India remains vulnerable to oil shocks and shortages are increasing grain prices. He added that India is not in a position to create currency stabilization fund. Several economists have suggested that India should use its large foreign exchange reserves to create a fund smooth the fluctuations in rupee value.

The governor also added that India current sharp rise in foreign currency reserves reflects flow of funds into the country and is not the wealth of the nation that the government can use. India''s foreign exchange reserves touched a record $247.8 billion on Sept. 28, up nearly $12 billion from the week earlier it was the fifth-largest foreign exchange reserves holder in the Asian region.

Of the Sensex stocks Reliance Energy led the decliners with a loss of 4.67% to 1,379 rupees, ACC slid 5.2% to 1,115 rupees, Ranbaxy Laboratories fell 4.8% to 412.30 rupees and NTPC lost 4.8% to 204.7 rupees.


Metal companies stocks were active led by a rise in steel companies. Tata Steel slump 5.3% to 789 rupees, SAIL retreated 5% to 192.40 rupees JSW Steel closed weaker at 5.6% to 804.2 rupees, Sterlite Industries edged down 2.7% to 742 rupees and Hindalco Industries declined 4.5% to 161.6 rupees. Jai Balaji gained 5%, daily upper limit, after the company signed an agreement with the West Bengal government to build a steel, cement, and power plant complex.

Reliance Industries lost 2.7% to 2,416 rupees.

Reliance Power Ltd announced it is planning to borrow 76,472.80 crore rupees to fund its 12 capital projects. Already, Reliance Power has courted Macquarie India Advisory Services, ABN Amro Bank and Deutsche to arrange syndicated loans of $2 billion each.

Bharti Airtel shed 0.8% to 984.8 rupees on reports that it may sell around 10% stake in its infrastructure division to U.S. based private equity companies for $1.1 billion.

Among the stock which gained in the Sensex, Infosys which was up 0.5% to 2,000.45 rupees, TCS climbed 0.8% to 1,078.5 rupees, Satyam Computer Services gained 2.5% to 455.55 rupees and Wipro closed firmer at 1.8% to 469.65 rupees. Bharat Heavy Electrical rose 1.7% to 2,190.75 rupees.

Patni Computer Systems was up 4.8% to 480.05 rupees on reports that two of its directors Gajendra Patni and Ashok Patni will resign from the board effective October 1st, 2007. iGate Global Solutions surged 10% to 264 rupees ahead of its second quarter results on Wednesday.

Rajesh Exports fell 0.7% to 879 rupees after it reported earnings rise of 156% in the second quarter ending at the end of Sept.

Kotak Mahindra closed 5% lower to 912 rupees after the news that the bank is exploring to sell a stake in the company to raise $400 million.

[R]8:30AM New York – Stocks in New York are indicating a lower opening.[/R]
Market Averages futures in the pre-market New York trading are indicating weak opening with a negative bias. Dow Jones Industrial Average is down 25 to 14,131, Nasdaq futures are edging lower 6.3 to 2,773, and S&P 500 is down 4 to 1,553.
On the deal front three deals were reported in Europe. SAP Ag, German software developer has agreed to acquire French database application developer Business Objects for $6.8 billion in cash. SAP stock fell 5% in Frankfurt trading after the news but Business Objects stock gained 17% in Paris trading.
Vodafone Group agreed to acquire Italian and Spanish telecom business from Tele2 AB for $1.1 billion. Shire, pharmaceutical company agreed to sell dermatology products and six products in the development stages to Almirall of Spain for $213 million.
Oil in London trading fell 60 cents to $80.60 per barrel and is likely to go lower as spreads prices between crude oil and gasoline widens.
Traders are focuses on earnings season with Alcoa, General Electric, and Yahoo to release earnings in the next two weeks. Alcoa is expected to report earnings between 69 cents and 71 cents. Several banks are scheduled to release earnings in the next two weeks including Citigroup, Wachovia, Bank of America, and Fifth Third.
Yum brands ((YUM)) operator of fast food joints including Pizza Hut, KFC, and Taco Bell, is scheduled to report earnings 45 cents after the close in New York today.
In Asian markets trading Philippines led the region with a rise of 2.6% followed by gains in Pakistan of 1.9%, Thailand 1.3%, Taiwan 1.1%, and in Indonesia 1.0%.
Japanese markets were closed on Monday. Markets in Shanghai gained 2.5% after a week of holiday but banks led the gainers. China Life Insurance and ICBC jumped 10%, daily trading limit, and Bank of China surged 6%.
Australia closed to a record high of 6,654.30 after reaching a new intra-day record high. India fell 2.5% after two weeks of daily new record highs.
European markets at mid-day trading are slightly lower after led by UK and Spain with losses of 0.4%.