Sensex Drops, RBI Hikes CRR, Imports Rise

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

Sensex in India fell nearly 1% after the Reserv Bank of India took steps to drain liquidity from the market. RBI increased the capital reserve ratio for banks by 0.5% to 7.5% and left the interest rates unchanged. The steady fund flows from the international markets has lifted rupee against dollar. RBI move is likley to curb the inflation.

[R]10:00AM New York, 7:30PM Mumbai - Sensex declined as Reserve Bank hikes cash reserve ratios.[/R]

Sensex closed weaker at 1%, pulled back by the banking shares after the Reserve bank of India announced it had raised cash reserves ratios by 50 basis points to 7.5% with effect November 10th. IT shares and auto stocks also traded lower. The central bank increased the reserve requirements to drain the excess liquidity from the market. The Reserve Bank left the interest rates unchanged.

Banks fell on the hike in cash reserves. ICICI Bank fell 0.7% to 1,240.25 rupees, HDFC Bank lost 1.3% to 1,618.3 rupees and State Bank of India shed 2.6% to 2,062.2 rupees.

The S&P CNX Nifty ended fell 0.6% or 37.15 to 5,868.75. The Sensex index lost 1% or 194.16 to 19,783.51. Turnover on the BSE was recorded at 10,981 crore rupees while revenue on the National Stock Exchange was recorded at 24,636 crore rupees.

Of the Sensex 30 shares, 8 gained while the rests slumped. Of the BSE stocks 1,051 advanced 1,657 fell and 345 remained unchanged.

The Reserve Bank of India has increased the cash reserve ratio by 50 basis points to 7.50% as of November 10th. RBI left the annual growth forecast at 8.5% for the current fiscal year.

RBI said inflation will be contained close to 5% during the rest of the year 2007 and fiscal 2008 and said that it is targeting inflation in the medium term at 3%.

Oil companies will be permitted to hedge foreign exchange exposures by using overseas over-the-counter or exchange traded derivatives up to a maximum of one year forward.

Importers and exporters with foreign currency exposures will be allowed to write covered call and put options in both foreign currencies or rupees and take positions across different foreign currencies.

RBI said merchandise exports rose 18.2% in the dollars during the first half of fiscal 2008 ending in September compared to 27.1% in the same period a year ago. During the latest period growth in import was at 31% compared to 20.6% in the year ago.

Non-oil imports rose by 44.3% and oil imports increased 6%.

India''s foreign exchange reserve increased by $62 billion during the first half of the current fiscal year to $261.1 billion as of October 19th. The rupee appreciated by 10.3% against the US dollar and by 2.4% against the euro and by 5.4% against the pound sterling and 7.1% against the Japanese yen during the current financial year at the end of the last week.

Of the index share, Reliance Energy led the advancers. Reliance gained 9% to 1,789.20 rupees. The company announced its intentions to transfer its road, rail, real estate and other infrastructure projects to a separate unit.

Bharti Airtel gained 0.5% 999.75 rupees and Dr.Reddy''s Laboratories rose 0.6% to 615.45 rupees, Wipro edged 0.01% higher to 509.7 rupees, Bharat Heavy Electricals rose 1.6% to 2,654.55 rupees, Larsen & Toubro advanced 1.06% to 4,323 rupees.

Reliance Natural jumped 4.8% to 115.15 rupees and Reliance Petroleum gained 5.3% to 233.8 rupees.

Of the Sensex index stocks, Mahindra & Mahindra slid 7% to 740.6 rupees, Maruti Suzuki India shed 8.5% to 1,085 rupees, Hero Honda Motors lost 2.6% to 725 rupees, Tata Motors retreated 4.9% to 767.3 rupees and Bajaj Auto slumped 0.6% to 2,487.05 rupees.

Maruti Suzuki has announced it will invest $1.8 billion on research and development, marketing and capacity expansion in the next five years.

Infosys was down 0.5% to 1,851.3 rupees, Tata Consultancy Services lost 1.9% to 1,048.5 rupees, Satyam Computer Services shed 0.6% to 479.45 rupees, and Reliance Industries declined 2% to 2,770.50 rupees.