Sensex Drops 2.8%, Fuel Price Hike

123jump.com Staff
04 Jun, 2008
New York City

After a heated debate the government approved price increase for petrol, diesel and cooking gas. The price increase of 5% and lower of import duties will help state controlled oil companies to reduce losses. Sensex index fell sharply after the price increase on the fears that record inflation will only rise. The 30-share BSE Sensex fell 2.8% or 447.77 at 15,514.79. On the National Stock Exchange, the S&P CNX Nifty declined 2.8% or 130.3 points at 4,585.60.

[R]10:00AM New York, 7:30PM Mumbai - Government approves 5% rise in fuel price. State Bank of India increases interest rate on foreign currency deposits.[/R]

Fuel prices rise 5%

The Government on Wednesday agreed to raise fuel prices by about 10% to curb losses at state-owned refiners. Following a heated debate over fuel price increases, the cabinet also agreed to cut the import duty on crude oil to support refiners and retailers Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp.

Petrol price are expected to rise 5 rupees per liter from the current national average of 45.55 and diesel price is expected to increase 3 rupees from the current retail price of 31.50 rupees.

Fuel price hike of 5% will help oil refining and marketing companies controlled by the government to reduce some of their losses but the gap between the recent increases in international and domestic prices still remain large. Prices of crude oil in international markets have increased more than 100% in the last one year but domestic prices have increased only 10%.

Separately, State Bank of India on Wednesday increased interest rates on foreign currency non-resident bank account deposits and non-resident external term deposits with effect from June 1.

Market highlights

The 30-share BSE Sensex fell 2.8% or 447.77 at 15,514.79. On the National Stock Exchange, the S&P CNX Nifty declined 2.8% or 130.3 points at 4,585.60. Of the BSE traded shares, 676 shares gained, 1,967 declined and 76 shares remained unchanged.

Among the 30-member Sensex index stocks, 29 declined while ONGC was the lone gainer.

Trading statistics

Daily turnover on the BSE stood at 5,551 crore rupees as compared to 5,252.69 crore rupees in Tuesday. Trading turnover on the NSE was 14,186 crore rupees.

ONGC was the most active stock on the BSE with the turnover of 313.48 crore rupees followed by Reliance Industries, Reliance Petroleum, Essar Oil and Reliance Capital.

IFCI recorded the highest volume of 1.78 crore shares on BSE followed leading volume turnovers in Reliance Petroleum, Ispat Industries, Reliance Natural Resources and Essar Oil.

Market movers

DLF lost 4.7% to 555.10 rupees. The company''s net profit rose 536.6% to 2,590.28 crore rupees on 388.1% rise in sales to 5,532.88 crore rupees in 2008 over the same period last year.

Metal stocks declined. Sterlite Industries fell 6.7% to 841.40 rupees and National Aluminium Company declined 1.7% to 478.30 rupees.

Power stocks fell. Tata Power Company fell 7.1% to 1,165.85 rupees and Powergrid Corporation of India declined 37% to 88.30 rupees.

BPCL fell 7.8% to 324.05 rupees and Indian Oil Corporation lost 3.6% to 418.20 rupees. The oil companies have so far reported losses of over 2.25-lakh crore rupees due to the high crude prices and in the absence of revision in the domestic retail prices.

They have said they will run out of cash to import crude if the government fails to bail them out.

Auto stocks were subdued post oil price hike announcement. Hero Honda Motors fell 4.3% to 764 rupees, Mahindra & Mahindra declined 3.2% to 571.50 rupees, Tata Motors fell 4.9% to 542.50 rupees and Bajaj Auto lost 4.9% to 551.60 rupees.

Reliance companies update

Reliance Industries lost 4.1% to 2,296.70 rupees. Reliance Power declined 7.3% to 202.80 rupees and Reliance Infrastructure lost 4.9%.

ONGC gets nod for stake sale in gas block


ONGC has won oil regulator DGH''s approval for giving stakes in its gas-rich Krishna Godavari basin block to Petrobras of Brazil and StatoilHydro of Norway.

The Directorate General of Hydrocarbons has agreed to ONGC proposal to give 15% stake to Petrobras International Braspetro BV and 10% to Hydro Oil and Energy India BV in block KG-DWN-98/2.

Block KG-DWN-98/2 sits next to Reliance Industries'' prolific KG-DWN-98/3 or KG-D6 block, off the east coast. ONGC currently holds 90% interest in KG-DWN-98/2 while the remaining 10% is with Cairn Energy India Ltd.